Ministry of Finance of the Republic of Bulgaria
MINISTRY OF FINANCE LAUNCHES NEW EUR INSTRUMENT IN THE MARKET AT A HUGE INTEREST OF INVESTORS
Yesterday, 16 January 2011, MoF put in circulation a new issue of 7-year EUR-denominated and payable GSs. The nominal value of the proposed and approved volume of the auction is EUR 35 million. A reopening of the issue is forthcoming to galvanize its liquidity on the secondary market. This bond is a new benchmark instrument in the long-term segment of the debt curve and diversifies the maturities proposed in EUR in the issuing calendar of 2012. This new instrument will further encourage the interest of market participants in investing in Bulgarian government debt after MoF successfully launched a new issue of 10.5-year GSs in the market.
Auction demand exceeded supply by almost three and a half times, with primary dealers' offers being for almost EUR 120 million. The bid-to-cover ratio of 3.42 is one of the highest reached since March 2011 and shows the greater interest of investors. In addition to the traditional active presence of banks acquiring around 36% of the nominal value approved, pension funds (48%) and insurance companies also took active participation, acquiring 13 per cent of the securities offered.
The average weighted annual auction yield of 4.45% is indicative of the trust of investors in the Bulgarian sovereign debt and of their individual approach when evaluating the risk premium of our government debt. This is taking place at the background of the downgraded ratings of a number of EU Member States.
The spread reported in comparison to German federal bonds amounts to 323 basis points, which is a decrease compared to the previous auction (350 bps). The yield registered is significantly below the current yield of bonds of similar characteristics of the states currently experiencing financial difficulties - Hungary (10.04%), as well as compared to states reporting high economic growth like Turkey (5.74%) and Poland (5.05%) and euro zone members not being financially supported like Slovenia (6.33%) and Slovakia (4.89%).
The high subscription to the auction of almost 3.5 times is indicative of the successful issuance policy of the government on the domestic market. After reporting last week the lowest value since November 2008 of the long-term interest rate of Bulgaria assessing the degree of cohesion and in the conditions of an extremely risky international economic and financial environment, Bulgaria strengthens its status of one of the most stable debt issuers in the region.