Cyprus received a vote of confidence from the international markets yesterday, taking advantage of investors' demand for government bonds, in order to strengthen the state's cash resources, to face the effects of the pandemic and to refinance the debt with cheaper loans. Yesterday, Cyprus raised € 1 billion with the lowest interest rate ever achieved by issuing a 5-year bond.
Finance Minister Konstantinos Petridis, in a written statement, states that, although the final pricing will be determined later, it is expected that the interest rate will be around 0.05% – 0.06% per year. “At a time when the crisis has severely affected much of economic activity, the issuance of the five-year € 1 billion bond boosts liquidity to address the economic impact of the pandemic,” he said.
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“The primary concern of the government was, and remains,” he said, “to secure the necessary ammunition, which will allow us to support the welfare state and the health system until the economy recovers, while ensuring fiscal sustainability.”
The interest for the 5-year loan was quite high, with offers exceeding € 8.5 billion from investors. The interest rate (yield) for the 5-year bond rose close to zero, specifically to 0.05% (mid swap +48 basis points). It is the first European bond issued by Cyprus for 2021 and the raising of € 1 billion will be used for the refinancing of the debt (T-Bill) that the state had borrowed from domestic banks in April 2020, amounting to € 1 , 25 billion
It is worth noting that both government bond issues and investor demand in the eurozone jumped to record levels in the first month of the year. Governments raised a record 48.8 billion euros in January through syndicated bond issues, amid strong investor demand. France, rated “AA”, saw demand soar to € 75 billion for its 50-year bond, from which it raised € 7 billion. Greece, in the “BB / BB-” category, raised € 3.5 billion from its new 10 years, with demand reaching close to € 30 billion. Cyprus raised € 1 billion yesterday with a total bid of € 8 billion.
The Republic of Cyprus has instructed investment banks Barclays, BNP Paribas, JP Morgan, Morgan Stanley and Société Générale to lead the issue. The transaction took place on the London Stock Exchange.
