Sovereign debt: While the Grand Duchy’s government debt is rising, it remains an attractive bet for the bond markets.
Luxembourg government debt rose about 10% in the first quarter, but remains the third lowest level in the EU, figures released this week have shown, while the Grand Duchy continued to find rapid buyers for its bonds.
As of March 31, Luxembourg owed just over €10 billion, or 22.4% of GDP, compared with just over €9 billion, or 21% of GDP, during the first quarter of 2012, Eurostat said on Monday.
Nevertheless, within the EU Luxembourg’s proportion of government debt to the size of the overall economy ranked only behind Estonia and Bulgaria.
In comparison to the Grand Duchy’s 22.4% level, first quarter 2013 rates were higher in Belgium (104.5%), France (91.9%) and Germany (81.2%), the statistics bureau reported.
Bonds attract interest
Earlier this month, Luxembourg’s government issued €2 billion worth of 10 year bonds, paying an interest rate of 2.125%, the state treasury said in a press statement.
The offering was oversubscribed and sold out in less than an hour, the treasury reported on July 2. “The Grand Duchy responded to the dearth of AAA rated sovereigns this year, choosing an ideal issuance window and was rewarded with jumbo size and very fine pricing.”
According to Thomson Reuters data on Tuesday morning, Luxembourg paid a lower yield than the governments of Belgium (2.55%), the US (2.48%), the UK (2.29%) and France (2.19%). However the Grand Duchy’s cost of borrowing is higher than Japan’s (0.77%), Germany’s (1.52%) and Sweden’s (2.10%).
In March, Luxembourg sold €750 million in 15 year bonds, also paying a 2.25% yield.