Third bond is­sue be­low € 1.5 bln by year-end

Financial Mirror (Cyprus) - - FRONT PAGE -

Fi­nance Min­is­ter Haris Ge­or­giades said on Tues­day that the gov­ern­ment will re­turn to the in­ter­na­tional mar­kets for the third time in one and a half year and will bor­row less than EUR 1.5 bln.

?It won’t be EUR 1.5 bln or more,” he told CyBC ra­dio re­spond­ing to a Fi­nan­cial Times re­port ac­cord­ing to which the gov­ern­ment plans to is­sue a EUR 1.5 lbn 10-year bond be­fore the end of the year.

“It will be less. We don’t have such needs”, he said, as the has a re­fi­nanc­ing need of EUR 1 bln next month, as well as 3 bln in ma­tur­ing bonds next year.

“The ex­act amount, the ma­tu­rity and when we will ex­actly at­tempt this is­sue will be de­cided later,” he added. “We have an­nounced the se­lec­tion of four large in­vest­ment banks who will un­der­write a pos­si­ble new is­sue.”

The four un­der­writ­ing banks are Bar­clays, HSBC, Gold­man Sachs and No­mura.

The min­is­ter’s com­ments came af­ter the the Euro­pean Sta­bil­ity Mech­a­nism board of gover­nors an­nounced the pay­ment of a EUR 500 mln tranche to Cyprus as part of the 10 bln bailout plan.

How­ever, Cyprus has used up only two third of that amount and may con­sid­er­ing util­is­ing those funds for other projects, such as fi­nance of de­vel­op­ment projects, as it has stated its in­ten­tion to exit the three-year bailout pro­gramme by March next year.

Gov­ern­ment spokesman Ni­cos Christodoulides said that “such moves will in­di­cate that the econ­omy’s cred­i­bil­ity is re­stored at in­ter­na­tional level”

“Con­fi­dence has been re­stored and mar­ket ac­cess reestab­lished. Mar­ket con­di­tions per­mit­ting, we are plan­ning a new bond is­suance by the end of the year in line with our an­nual fund­ing pro­gramme, but the ex­act tim­ing and de­tails have yet to be de­ter­mined,” Ge­or­giades had told the FT.

Cyprus will be able to bor­row at a rate of 3.5%, the news­pa­per said, with yields on the ex­ist­ing 10-year bond (2021) hav­ing dropped from 5.75% in Fe­bru­ary to 3.69% at present.

In April, the gov­ern­ment had sold EUR 1 bln in seven-year bonds, with the yield set at 4.0%, be­low ini­tial ex­pec­ta­tions. Last year, it sold EUR 750 mln in five-year debt at a lower than ex­pected rate of 4.85%.

Since then, its credit rat­ing has been up­graded by Stan­dard and Poor’s and its deficit ap­pears to have sta­bilised at lev­els much lower than ex­pected.

The rea­son is the bet­ter than ex­pected macroe­co­nomic en­vi­ron­ment as the min­istry es­ti­mates that growth will reach 1% this year.

The Min­istry hopes that the 10-year bonds will main­tain yields sig­nif­i­cantly be­low 4%.

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