10-year bond yield declines to 4-year low

The yield on the ten-year bond, and subsequently the cost of borrowing for Cyprus, declined to a four-year low in the backdrop of the ECB’s decision to purchase of private sector credit, including asset-backed securities and covered bonds.

The yield of Cypriot ten-year bonds that mature in 2020 declined on Monday to 4.50% from 4.54% on Friday, a new low in the last four years.

The five-year bond (maturing in 2019) also continued its downward path declining to 4.36% on Monday from 4.45% on Friday, remaining below the nominal yield of 4.85% defined during its issue on June 18, the first time Cyprus returned to the international markets in four years.

The spread of the Cypriot 10-year bond and German bond declined to 355 basis points.

The Cypriot borrowing costs spiked on June 14, 2012 to a historic high of 16.5% but entered a downward path after the government requested financial assistance from the EU and the IMF.

The island’s borrowing costs began rising anew following the bailout agreement in March 2013, that featured the haircut of bank deposits above 100,000 to save Bank of Cyprus that, in turn had absorbed the now defunct Laiki Popular Bank, twice rescued with a government bailout.