Transcript: Interview with Luxembourg Treasury Director Bob Kieffer on 1 October
9 October 2025
By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 1 October 2025 with Bob Kieffer, Director of the Luxembourg Treasury.
Q: Mr. Kieffer, Luxembourg's debt-to-GDP ratio is projected to remain slightly below 27% this year. How does that shape your mandate compared to other euro area DMOs with much higher debt burdens?
A: Luxembourg has always been committed to keeping a low and very sustainable debt level. Hence, we issue less often than other issuers and use more straightforward instruments. We only use benchmark sized bonds and treasury certificates. Having very little debt – we manage around €20 billion - also comes with downsides. We have less liquidity than larger issuers. We don't have much of a secondary market. This entails a slight liquidity premium. From an investor perspective, most of our debt is buy-and-hold.
Q: How would you describe your issuance strategy? Is it more calendar-based than opportunistic?
A: Before the Great Financial Crisis, Luxembourg had virtually no debt and no bonds outstanding. We are becoming a more regular issuer because we have entered the phase where we refinance bonds from that period. Now, the 10-year and 15-year bonds issued then are coming to maturity. They need to be refinanced additionally to the bonds that we issue to finance the budget deficit. So, the deficit and refinancing need are what defines our calendar. Our issuance calendar is becoming more regular than it was previously, but it’s still largely opportunistic. So, we organize our issuances based on the maturities of our bonds that are coming to maturity, of course with a certain flexibility. We also use Treasury certificates to somewhat adjust the timing and meet liquidity needs in between bond issuances. Our thinking is that within a few years we might issue more regularly. However, because we have a conservative and prudent approach, at the end of the year we very often see that our deficit is actually lower than projected. If we had had a fixed calendar, we might then be in over liquidity.
Q: You said that in the next few years you might have a more regular issuance calendar. Why is that?
A: That is because every year from now on, we will have bonds that come to maturity. So, even if we had no deficit to finance, we would still have to refinance the bonds that come to maturity.
Q: So, that would be the main reason to increase issuance.
A: Yes. Luxembourg's public finances are very sound. Our deficits are at a very reasonable level. The projected deficit for the 2026 budget is around €1.5 billion. Obviously, that allows for the issuance of a benchmark bond of at least €1 billion. But it doesn't automatically require the issuance of a bond every quarter.
Q: Recently you issued a €2.5 billion 10-year benchmark bond. How did that go?
A: It was a very successful transaction, largely oversubscribed. We had a lot of investor interest, a very high-quality book and we also managed to place this bond at a very interesting and reasonable price with a very low spread. We initially thought about issuing only €2 billion, but given the favorable market conditions and the large book, we decided to take on €2.5 billion. That will also impact our potential calendar for 2026, because we now have more liquidity for longer. So, we adjust opportunistically to our needs, but also to market conditions.
Q: What should markets expect for next year’s strategy?
A: In early 2026 we will issue a retail defense bond. Additionally, we are planning a sovereign bond issuance for institutional investors later in the year.
Q: Have you already determined the size of the defense bond?
A: We are currently looking at an issuance size of €150 million. That might not be so impressive, but you have to bear in mind that the target audience for this bond will be the Luxembourg retail investor, and we are really in an experimentation phase where we have to see what the market appetite for this type of product will be. We will adjust the product for later years based on the experiences of this first issuance.
Q: You said that you expect the issuance to take place in early 2026. Will that be the first quarter?
A: Yes.
Q: Other than this defense bond, do you have anything else in mind for next year's issuance strategy?
A: We will obviously continue with our usual benchmark-sized sovereign issuances aimed at institutional investors. That could take place in the first half of the year.
Q: Given your small bond market, how do you ensure that the secondary market liquidity is sufficient for investors?
A: Investors that buy Luxembourg bonds have mostly a buy-and-hold strategy. So, the secondary market is not really our focus. We don't manage it actively for now. Investors have not requested us to put a larger focus on this either.
Q: Are you considering any buybacks, switches, or other liability management operations to smooth the redemption profile and improve the curve's liquidity?
A: We have been looking at that, but have concluded that it wouldn't bring much added value for us at this time. So, when it comes to smoothing the curve, what we rather do is use Treasury certificates to move maturities where needed.
Q: In June you issued your first digital Treasury notes. How did that go?
A: It went very well. It raised a lot of interest from different stakeholders and a lot of awareness for Luxembourg as an issuer, and not only for these bonds, but also for our traditional sovereign bonds. In terms of volume, it was an experimental size. We raised €50 million for six months. The issuance illustrated the effectiveness of the Luxembourg legal framework and ecosystem because it was made entirely under Luxembourg law with local entities, and it was using not only blockchain technology but also the Luxembourg blockchain legislation.
Q: Do you anticipate another issuance of this kind anytime soon?
A: I wouldn't say anytime soon, but we will definitely continue to work on further distributed ledger technology (DLT) issuances. Don't expect us to do another DLT issuance before the end of the year, but you should not exclude that we issue another one within a year or so.
Q: Do you foresee issuing another sustainable bond anytime soon or reopening the existing line?
A: No, the existing line is not designed to be reopened. We will not exclude the possibility of issuing another sustainability bond in the future, but I'm pretty confident that we will not look into that option in the very near future.
Q: Are you working on any other innovations in your insurance strategy?
A: The defense bond is quite an innovation. We are also the first European sovereign, to our knowledge, to publish a defense bond framework. It’s based on the model and experiences of our sustainability bonds. We are following pretty much the same playbook here that we have used for our sustainability bond. Except that this defense bond will be a retail bond. That’s a change, because so far, the last decade we have only issued bonds for institutional investors.
Q: What are your plans in terms of retail bonds?
A: A number of countries have permanent offerings for retail investors. We are not planning on doing this, at least not in the near future. So, our main way of financing will remain through bonds and Treasury certificates aimed at institutional investors. The retail defense bond is a very specific first product. If the experience turns out to be positive, it might become an annual product or issuance, but not something we would issue monthly.
Q: What about your investor composition? Are you willing to diversify your investor base in any way?
A: When we look at the geographical distribution of investors of our €2.5 billion bond issued in September, I believe the investor composition here is more or less representative of our previous bonds as well. The Luxembourg community makes up around 15%. Then come our immediate neighboring countries – France, Germany and the Netherlands – which make up probably about a third. The Nordics make up about 10% and Switzerland about 8%. UK and Ireland about 15-16%. So, what you see is that we are very heavy in European investors. There could be some potential in exploring broadening the base a bit, and we have increased conversations with potential investors from Asia or from the Middle East. It's not an absolute priority, but is certainly something we are looking at.
Q: I assume you are not currently planning on doing any foreign currency issuances.
A: No, not at all. As I mentioned, we like to keep things simple. Working with foreign currencies adds a layer of complexity. If we can, we will avoid that. Given the large interest and the oversubscription that we usually see for our euro-denominated bonds, there is really no need for us at this point to issue in any other currency.
Q: Luxembourg holds a AAA rating. What are the risks that could lead to a revision of the outlook? How likely are they to materialize?
A: The economy is doing quite well in a difficult context. If, hypothetically, our rating outlook were to be put under consideration, I suspect it would be less for reasons linked to the Luxembourg economy as such, but more for reasons related to the larger context of the world economy. The fact that Luxembourg is a small and open economy means that we feel the effects of a global or European downturn more immediately than larger economies. That said, history has shown that when there's an economic downturn or political uncertainties around us, people often see Luxembourg as a beacon of stability, and we tend to do better than the average. Also, the forecast for the Luxembourg economy over the next few years is rather reassuring. We have very sound public finances, so we don't see any risk for our AAA rating.