Blood for Bonds: Why governments are now competing for their citizens' money

Read the market analysis and fund positioning

Anyone who donates blood in Bucharest is offered the chance to invest in bonds as a thank you. As part of this unusual initiative, the Romanian government is issuing bonds from a special tranche bearing interest of up to 7%. The minimum investment for blood donors has been reduced to 500 LEI (approximately 108 USD), down from 5,000 LEI (approximately 1,075 USD).

Romania is therefore solving two problems at once: a shortage of donated blood and insufficient funds in the state coffers. According to Bloomberg, the 'blood-for-bonds' programme has raised around 2.8 billion lei – equivalent to approximately 604 million US dollars – from tens of thousands of retail investors since the beginning of 2025.

Countries are looking for new buyers

Romania is by no means the only country that finances its budget in this way. For example, Italy issues its own bonds for private investors. Japan and Brazil sell government securities directly to their citizens. The pattern is the same everywhere: reliable major buyers, such as central banks, are reducing their holdings rather than buying more. Foreign private investors generally demand higher risk premiums than domestic investors. Meanwhile, budget deficits are growing.

When someone has to sell more debt and finds that there are fewer major buyers, they turn to their own people. The public are loyal creditors. They make regular purchases and rarely sell in a panic. Japan has demonstrated for decades just how resilient a bond market can be when its securities are predominantly held domestically.

However, the interest rate of around 7% on Romanian debt comes at a price. It represents a risk premium. In 2025, Romania’s deficit was 7.9 per cent of GDP, the highest in the EU. Moody’s rated the country at just Baa3, which is only one notch above speculative grade. High interest rates for citizens also mean high costs for the state.

A different approach to financing the national budget is being tried across the Atlantic. Washington is pulling a different lever by putting pressure on the central bank. The US President has publicly called for lower interest rates. However, the Fed is doing the opposite. In September, it raised the key interest rate to between 3.75 and 4.00%, the first increase since July 2023. Meanwhile, deficits are spiralling out of control. And the conflict in Iran is driving the price of oil up to as much as $108 a barrel. Americans are directly feeling the impact in their wallets.

Tangible policy is thus being made in the bond market. The average interest rate on 30-year mortgages has increased to 7.37%. This will hit homebuyers hard at a particularly inopportune time, just a few weeks before the mid-term elections.

The paradox is this: a strong economy exacerbates the problem. In September, the US private sector grew at its fastest rate in over five years, despite mounting price pressures. Neither high interest rates nor tariffs are slowing the boom, which is being fuelled by investment in AI. For the Fed, this is a reason to maintain high interest rates.

Europe is not immune either

France is now paying a spread of more than one percentage point on ten-year government bonds compared to Germany. This is the first time the 100-basis-point mark has been exceeded since the 2011–12 euro crisis. The country is under increasing pressure due to high levels of debt, a deficit well above the EU threshold and a government without a stable majority. Investors are happy to be paid for this uncertainty. However, it is the weakest borrowers who are affected first.

Germany is still remaining silent

The federal government ceased its retail business involving Federal Treasury Notes in 2012. Meanwhile, around 3.6 trillion euros of German savings are held in bank accounts. While Bucharest offers its blood donors a generous 7%, Berlin offers its savers nothing. This is a luxury afforded by sound public finances – for the time being, at least. Germany's financing requirements are also growing with the special funds for infrastructure and defence. The question of citizens as creditors will inevitably arise, and France's recent history shows just how quickly a country can go from being a model pupil to a problem child.

What does this mean for investors?

With yields at their highest level in two decades, quality-conscious investors are invited to take advantage. Here at Ethenea, we adhere to high credit ratings and long maturities, ensuring that debtors will be able to fulfil their obligations in the future.

Romania pays for blood with interest. America and France pay for mistrust with interest. Investors in government bonds should understand what they are paying the premium for.