TALLINN – The market value of the Estonian stabilization reserve was 411.8 million euros at the end of March 2019, and the value increased by 272,000 euros during the quarter, the Finance Ministry said on Thursday.
The profitability of the reserve in the first quarter was 0.26 percent, 0.75 percentage points higher than the profitability of the reference portfolio representing the market's average.
Of the assets of the reserve 65.2 percent has been invested in very low risk government securities and the remaining 34.8 percent in bonds issued by banks and deposits. Belgian treasury bonds made up some 20 percent of the fund's investments, bonds of the German government-owned asset management company FMS Wertmanagement 11.7 percent, Dutch treasury bonds 9.7 percent and Swedish treasury bonds 9 percent at the end of March.
The main aim of the investment of assets into the stabilization reserve is to ensure the preservation of asset value. No currency risks are taken when investing assets. The reserve may also need to be used quickly, which is why the second aim is to ensure high liquidity. Earning revenue is third on the list of aims for the investment of assets.
The interest performance of the reserve is affected by the negative interest rate environment. The yields on the euro area treasury bonds that meet the investment criteria of the Estonian treasury are negative for maturities of up to five years, as are generally negative the short-term rates for euro area bank deposits and bonds.
The stabilization reserve was created in 1997 in the amount of 44.84 million euros to reduce general economic risks. In 2009 224 million euros was taken out of the reserve to reduce general economic risks arising from the global economic crisis.
According to law, the reserve can be used for mitigating general economic risks and alleviating crises, solving states of emergency, states of war or other emergency situations. The reserve can also be used for solving and preventing financial crises of financial institutions caused by liquidity or solvency related difficulties or significant failures in the payment or funds transfer systems.