Exclusive: Estonian DMO Head: Increased Defence Spending Could Lead to Higher Issuance, Long-Term Bond Comeback

19 May 2025

Exclusive: Estonian DMO Head: Increasing Defence Spending Could Lead to Higher Issuance, Long-Term Bond Comeback
- Janno Luurmees, Head of Estonia’s State Treasury Department: ‘We anticipate another Treasury bill auction in 2H25’
- Luurmees: Increasing defence spending may lead to higher issuance in 2H25
- Luurmees: Higher defence spending ‘could bring long-term issuance back to consideration’
- Luurmees: Might pre-finance part of 2026 budget if market conditions favourable
- Luurmees: ‘We are far from any kind of debt spiral’
- Luurmees: Currently no decisions made about future retail issuances
- Luurmees: ‘We have no plans to issue green bonds at this stage’

By Marta Vilar – MADRID (Econostream) – Higher defence spending might lead Estonia to increase issuance volumes in 2H25 and could motivate the country to issue long-term instruments, according to Janno Luurmees, Head of the Estonian State Treasury Department.

In an interview with Econostream on May 19 (transcript here), Luurmees said that ‘[t]he decision to increase defence expenditure may lead to somewhat higher issuance volumes in the second half of 2025, but the overall strategy remains prudent and adaptive.’

Asked if Estonia would issue a Eurobond in 2025, Luurmees said that there was no immediate need for such issuance but that long-term instruments could be considered again given higher defence expenditures.

‘We may also pre-finance part of the 2026 budget if market conditions are favourable’, he said.

The auction delivered in March with which Estonia issued €250 million was ‘well received’, according to Luurmees, and the Treasury expected to deliver another auction in 2H25 if liquidity needs allowed for it.

With respect to the Eesti Pank’s warning last year about a potential debt spiral, Luurmees said that the ‘lower-than-forecasted deficit in 2024 was unexpected, but it has certainly helped the fiscal picture.’

Despite increasing debt levels due to higher fiscal spending, debt would remain low by international standards, he said.

‘We are far from any kind of debt spiral’, he added.

Regarding retail issuance, Luurmees said that the test to the local market in late 2024 ‘went well’ after using €200 million in a 2-year bond that was four times oversubscribed.

‘There are currently no decisions made regarding future retail issuances’, he said. ‘In general, we would prefer not to issue separate retail bonds but rather make regular government bonds more easily — and at a lower cost — accessible to retail investors.’

There were no plans regarding green bond issuance so far, according to Luurmees, given the already small overall issuance volume of Estonia, which would make splitting liquidity between several instruments unefficient.

‘That said, we remain fully committed to environmental targets and continue to invest in projects that support them’, he said. ‘We are also preparing to add more ESG-related information to our investor webpage and presentation materials in the near future.’