Malta Government Bonds: Your Complete Guide

Government bonds are amongst the most trusted and widely used investment options around the world, offering a way to grow your money with relatively lower risk. In Malta, government bonds play a key role in both personal and institutional investment strategies. Whether you are just starting to explore investment options or looking for ways to diversify your portfolio, understanding how Malta Government Bonds work is essential. This guide walks you through the basics of government bonds, outlines their pros and cons, and gives you a clear picture of what Malta government bonds can offer.

What are Government Bonds and Securities?

Government bonds are essentially loans that investors make to a government. In return, the government promises to pay back the original amount (known as the principal) on a set date in the future (known as the maturity date), along with regular interest payments (known as coupons) until that date.

Governments issue bonds to raise money for public spending, such as infrastructure, education, or health services, instead of increasing taxes or cutting services. When you buy a government bond, you are effectively lending money to the government, and in exchange, you earn interest.

Types of Government Bonds

Understanding the distinct types of government bonds is essential because each one is structured to meet specific financial goals and risk preferences.

The bond’s structure, including maturity length, interest payments, and target audience, influences its role in your investment strategy and your returns. Bond yield, or the return from holding the bond, varies with bond type, interest rate, and market conditions.

• Fixed-rate bonds: these pay a set interest rate at regular intervals and return the full principal at maturity. They offer predictable income.
• Floating-rate bonds: the interest rate varies based on market benchmarks. These offer protection against inflation or interest rate changes.
• Retail savings bonds: targeted at individual investors, these often come with lower entry points and are simple to understand.
• Treasury bills (t-bills): short-term securities, usually maturing in less than a year. They are sold at a discount and do not pay interest, but the return comes when they mature at full value.

Benefits and Risks of Government Bonds

Like any type of investment, government bonds come with their own set of advantages and potential downsides. Here is what to consider:

Government Bonds’ Benefits

• Different risks: although a common myth is that government bonds are safe investments, this depends on the issuer of the bonds.  When bonds are issued by stable governments like USA, Germany, France, UK and Malta, these are considered safe investments. However, when government bonds are issued by less economically strong governments, these are considered as higher risk. Examples of such riskier bonds would be bonds issued by Argentina, Egypt, Macedonia or Albania. 
• Steady income: bonds pay interest at regular intervals, making them appealing for those seeking consistent returns. Usually, government bonds are set up to pay semi-annual coupons (twice a year). Government bonds are considered as a very attractive instrument for pensioners and people requiring generating an income from their investments.
• Risk assessment with ratings: most government bonds are rated by agencies like Moody’s, S&P, and Fitch, helping investors assess risk. The highest rating is AAA (S&P) and Aaa (Moody’s). Ratings from AAA/Aaa to BBB/Baa are considered investment grade, while BB/Ba or lower are speculative (junk).
• Diversification: including bonds in your investment portfolio helps reduce risk, especially when paired with higher-risk assets like stocks.
• Capital preservation: since they return the principal at maturity, bonds are suitable for conservative investors looking to preserve capital.
• Accessibility: investing in bonds is easy as minimum amounts are low and widely available from most financial institutions. There is a healthy secondary market in government bonds, especially the higher rated bonds, and if you wish to sell your holdings before maturity, this can be done at the prevailing price. 

Government Bonds’ Risks

• Interest rate risk: if interest rates rise, the value of your fixed-rate bond may decrease if you choose to sell it on the secondary market, where existing bonds are traded between investors.
• Inflation risk: inflation may reduce the real value of your bond’s returns over time.
• Opportunity cost: if market conditions improve, you might miss out on higher-yielding investment options or have to sell your existing holdings at a loss.

Malta Government Bonds: What Do They Offer?

Now that we have considered what government bonds are and how they work, let us take a closer look at what is available in Malta. The Government of Malta issues government bonds regularly to fund national projects and manage the country’s finances. These bonds are typically issued in Euro and come with clearly defined terms such as the interest rate, maturity date, and application process.

Each new issue is announced publicly, giving investors the opportunity to review the conditions and decide whether the bond fits their financial goals. Whether you are a first-time investor or expanding your portfolio, the Malta Government Bonds offer a stable and regulated way to earn returns while contributing to national development.

Key Features

• Attractive interest rates: rates are typically competitive compared to standard deposits.
• Open to the public: retail investors can apply during the public offering period.
• Regular issuance: new bonds are issued throughout the year, giving multiple entry points to investors.
• Backed by the State: Malta’s government bonds are backed by the National Treasury, making them a lower-risk investment. Malta is rated A+ by Fitch, A- by S&P and A2 by Moody’s. All three rating agencies have indicated a stable outlook for the foreseeable future. 

Who Can Invest?

Both Maltese residents and foreigners can invest in Malta Government Bonds, although local residents often find them particularly useful for medium to long-term saving goals. Common investors include:

• Retirees looking for steady income.
• First-time investors looking for low-risk options.
• Savers seeking to diversify away from bank deposits.
• People or companies holding substantial cash (usually interested in short term government bonds and t-bills)

Get Started with APS Bank

At APS Bank, we believe in helping you make smart investment decisions. Government bonds can be a practical and relatively low-risk way to strengthen your financial future, and we are here to guide you every step of the way.

Whether you are looking to invest for the first time or seeking to expand an existing portfolio, our experienced team can assist you with:

• Investment advice: speak with an investment advisor at any APS branch for free.
• Tailored solutions: get a personalised investment plan based on your financial goals and risk appetite.
• Easy access: monitor your investments 24/7 using myAPS internet and mobile banking.
• Educational support: we will help you understand the benefits and risks of government bonds and any other options you are considering.

Ready to learn more or take the first step? Browse our investment options and fill in the form below to speak to one of our experts. At APS Bank, we are here to give you the tools and support you need to grow your savings and build a more secure financial future.

This information shall not be deemed as investment, tax or any other form of professional advice. You should consult your independent legal, investment or other advisors to ensure that any decision you make is suitable for you with regards to your specific circumstances and financial situation.

Approved and issued by APS Bank plc, APS Centre, Tower Street, B’Kara BKR 4012. APS Bank plc is regulated by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994 and to carry out Investment Services activities under the Investment Services Act 1994. Terms and conditions apply and are available on Terms and Conditions – APS Bank.