Inauguration UK Green savings bonds Buyers have a lower return on investment than competing products as government banks are committed to investor environmental efforts to drive demand.
National Savings & Investments, a government-sponsored savings system, said the first green bond to be launched on Friday will be offered at a fixed interest rate of 0.65 percent over three years.
Called “innocent gold foil,” according to NS & I, bond revenues come from environmental projects such as renewable energy, investment in green transport infrastructure, and pollution control, after the golden age of traditional British debt certificates. Will be used for government spending on.
“The UK is already a world leader in green finance, and these innovative new savings bonds offer both economic and environmental benefits in a transparent and secure way,” said Green. Prime Minister Rishi Sunak, who promoted the launch of the bond, said.Signal the UK’s commitment to environmental finance prior to COP26 Climate Conference next month.
However, investment analysts say green bonds can struggle to capture demand from interest rate-sensitive retail investors if the rate of return on offers is lower than can be found elsewhere. I’m warning you.
Wraith Halaf, Head of Investment Analysis at AJ Bell, said:
Khalaf last month Treasury costs £ 210m annually To match major bank savings bond rates of 1.8 percent.
In the past, NS & I savings bonds typically offered higher rates compared to the cost of government borrowing in the bond market.But that is waste Some of the most popular savings products two years ago said that very low gold yields made it significantly cheaper for the government to raise money from large investors rather than individual savers. I am.
NS & I Market share fell After reducing retail saver interest rates from the more competitive 1.15 percent of popular income bonds to 0.01 percent.
Becky O’Connor, Head of Pensions and Savings at Interactive Investor, said green bonds may “provide a pleasing element for savers,” but the rate is “uncompetitive.”
Not only is the interest rate on green bonds well below the highest interest rates on personal savings products, but it also means that they are lower than the yields savers offer to government bond investors, with three-year government debt currently at 0.68%. Is producing.
The launch will take place when bond yields rise sharply, in response to a hint from the Bank of England that investors may raise interest rates soon next month. A month ago, the yield on gilts for three years was only 0.25%.
The outlook for rate hikes could also weigh on individual investors’ enthusiasm for green savings bonds, which requires them to keep their money out for three years.
Some environmental advocates have a greenish debt plan for the government “PR exercise”.. They argue that the government should use the bond market at the best rate available to fund its environmental plans.
British government recently Started green borrowing program Targeting the financial markets, we raised £ 16 billion from two Green Gilt sales. So far, bond investors have proven willing to pay a small premium on these bonds in the process of accepting yields that are slightly lower than traditional government debt.
NS & I said green bonds will be on sale for at least the next three months, allowing an investment of £ 100 to £ 100,000.
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