Insurers interested in long-term bonds

The life insurance companies are interested in creating a ROL-denominated long-term government securities market, albeit bids get turned down because the interests asked do not match the expectations.
The obligations in the life insurance business are undertaken for very long intervals (5,10 or 20 years), so that insurers in this sector would make the ideal clients for this instrument, at least in theory.
“We bought T-bills during the first three-year issue for 12.5%. We are keenly interested to invest in the long term and if the economy development follows forecasts, this yield is good. If inflation goes down as expected, we’ll surely make profit in the second and the third year of the bonds,” Ciprian Ladunca, AIG Life financial manager said.
In an attempt to break up the short-term (one or two years) financing uncertainty, the Finance Ministry has released three three-year bond issues and is expected to release five-year ones soon. One thing though. Only the first issue was subscribed (200bn ROL at 12.5%), while the next two issues did not see the supply meeting demand: the interests asked by the banks (for them and their clients) were not accepted by the Finance Ministry, which was probably trying to cut rates. AIG Life was one of the clients that agreed to lend the State during the second issue, as well, settling for 12.5% again, but did not participate in the third.
“The Finance Ministry’s plan is very good, it is a positive sign that shows the economy is headed for stabilisation. This is extremely important to investors,” Ladunca says.
ING Nederlanden in its turn subscribed during the first three-year issue. “We found the interest to be reasonable. We subscribed to increase the asset portfolio duration. We want to manage our asset portfolio in line with the obligations undertaken and with the guarantees offered. We will go for longer maturities, if they come at a reasonable yield,” Sorana Baciu, ING Nederlanden Business Strategy and Corporate Communications director says.
sorin.pislaru@zf.ro