10-year T-bill yield breaks below 4%, new four-year low
The yield on 10-year Cyprus sovereign bonds dropped to 3.97% on Tuesday, down from 4.11% on Monday and 4.15% on Friday, the lowest level in almost four years.
This is near the bond’s all-time low of 3.81% recorded in October 2010.
The average yield on the Cypriot bonds averaged at 5.15% in the past twelve months, according to Bloomberg data. On March 3, 2014, the yield on the secondary market was almost 6.31%.
Government sources attributed the decline to the start this week of the ECB’s 1.14 trln euro quantitative easing (QE) and bond purchasing programme.
However analysts believe this excuse may be far fetched as Cyprus will not be able to take advantage of the ECB’s money-printing until parliament passes a long-overdue bill on foreclosures and banks start to recover their bad loans, last estimated at 50% of the entire island’s loanbook.
The yield on the 10-year Treasury bills issued in 2010 declined by 18 basis points on Tuesday to 3.97% having dropped 48 basis points to 4.15% on Friday, following the 4.50% high on September 8 last year.
The yield of the 5-year bond (matures in 2019) also declined, to 3.94% on Tuesday having receded to 4.07% on Friday.
Cyprus aims to see bond purchases of about EUR 500 mln from the ECB’s QE programme, but cannot participate in the scheme until it gets the all-clear from the fifth programme review, probably in April.
This is why Finance Minister Haris Georgiades has been overly confident that Cyprus will be able to return to the markets some time in 2015, with rating agencies waiting to see if Cyprus will comply with its 10 bln euro bailout programme by sticking to a fiscal programme and keeping up with the reform plan that includes privatising monopolies or selling government-owned assets to some EUR 1.4 bln by 2018.
Georgiades said in January that Cyprus may issue new debt twice this year.
Last week, the Minister told Reuters in an interview that Cyprus hopes to borrow on financial markets this year, saying the island’s economy had more in common with bailout turnaround Ireland than Greece.
Georgiades said Ireland, which reformed after near bankruptcy, was a role model as Cyprus climbs out of recession and prepares to borrow on markets ahead of the end of its reform-for-aid programme in the middle of next year.
The European Central Bank’s QE programme, under which it will print money to buy mostly government bonds, is not yet open to Cyprus as it has failed to implement a new law on foreclosures and insolvency that would make it easier to for the banks to repossess properties and lower their highrisk portfolio of non-performing loans (NPLs).
Georgiades said that Nicosia hoped to sell one or two new bonds this year, and predicted modest economic growth.
He also said he may not need close to EUR 2 bln of bailout cash that was earmarked for recapitalising banks and other spending. That money, he said, could be used to repay debts instead. state raise