Kiril Ananiev: The Exceptional Success of Eurobond Placement is Unique in Bulgaria’s Past Economic History
“We were extremely successful yesterday when we placed our first external EUR issue since 2016”, said the Minister of Finance Kiril Ananiev at a briefing. He explained that this had occurred within the ceilings for newly issued external government debt set in the Law amending the 2020 Budget, as well as within the volumes of the Global Medium-Term Note (GMTN) programme ratified in 2015 by the National Assembly and updated in the first half of this year in response to the crisis caused by the COVID-19 pandemic.
The issue was announced in two tranches: 10-year and, for the first time, 30-year bonds. “It triggered unprecedented interest among investors, which resulted in bids exceeding the targeted volume of BGN 2 billion by over 4 times. Responding to this unprecedented interest, we decided to increase the amount of the issue to EUR 2.5 billion which we allocated in two tranches of EUR 1.25 billion each”, Minister Ananiev said.
The Finance Minister highlighted that the final outcome was unique in Bulgaria’s past economic history: the yield of the two tranches could be compared to the yield of countries with higher credit ratings, including Euro Area members. The yield for the 10-year notes is 0.389%, with an interest coupon of 0.375%, while the yield for the 30-year bonds is 1.476%, with an interest coupon of 1.375%.
“The trust in our country is great, which is also confirmed by the participation of high-class investors such as central banks, state pension funds and other institutional investors with a very wide geographical range: Germany, Great Britain, the USA, the Netherlands, Switzerland, Belgium, etc. Bulgarian investors acquired 16% of the overall volume of notes”, Mr. Kiril Ananiev said. “We have thus positioned ourselves in the group of countries that are either sufficiently well-developed or sufficiently rich, or sufficiently disciplined to include our government securities as a sufficiently good-class collateral in their portfolios”, Deputy Minister of Finance Ms. Marinela Petrova added.
Minister Ananiev clarified that the funds raised through the issues would be used to refinance existing debt, increase the fiscal reserve, provide financial resources for the socio-economic measures adopted by the Governments in relation to COVID-19 and the country’s economic recovery, as well as to finance the budget deficit. Mr. Ananiev reminded that the debt limit had been increased to EUR 10 billion. After the current issue under the GMTN programme for debt issuance on the international capital markets EUR 2.356 billion remain unrealised, with no other appearance on the foreign capital markets being planned by the end of the year.
Minister Ananiev underlined that the success of the issue was as a result of the long-lived efforts for maintaining a strict fiscal discipline and of the extremely low level of external debt. Bulgaria ranks second in the European Union after Estonia in terms of debt/GDP ratio. “Undoubtedly, the key factor behind this remarkable performance on the international capital markets is Bulgaria’s joining the ERM II in July”, he added.