Luxembourg Issues €2.5bn Negative Interest Rate Bond

Luxembourg's Ministry of Finance confirmed on Wednesday that the state treasury had issued a €2.5 billion bond at a negative interest rate to combat the COVID-19 pandemic.

The Luxembourg state treasury yesterday successfully placed a bond issue at a negative interest rate (-0.045%). The €2.5 billion bond issue has a term of ten years and matures in March 2031. Public debt will amount, after this bond issue, to about €18.5 billion, which is equivalent to a rate below 28% of GDP and thus in line with the government aim of staying below the 30% threshold.

The "subscription book" opened on Wednesday morning. According to the Finance Ministry, the markets reacted positively, leading to "oversubscription".

BCEE, BIL, BGL BNP Paribas, Barclays and Deutsche Bank contributed to the operation as joint lead managers. The loan will be listed on the Luxembourg Stock Exchange (LuxSE).

Pierre Gramegna, Minister of Finance, commented: “I am delighted with the success of this operation, which is part of the desire to make the most of the current context of low or even negative interest rates. Thanks to its 'AAA' [rating], Luxembourg has been able to expand its liquidity cushion under advantageous conditions. The large excess demand is a testament to investor confidence in the strength of our economy and its ability to overcome the COVID-19 crisis in an efficient and sustainable manner".