Retail bonds pick up again, 28 mln sold, says PDMO
Interest has recovered in the monthly issue of 6-year retail bonds, the government’s alternative financing method after the economy crashed two years ago, with EUR 28.4 mln sold in the October series, having plunged to their lowest level in September series when interest rates were lowered substantially.
The Public Debt Management Office of the Ministry of Finance said that the tenth series attracted 61 bids for a total of EUR 28,424,600, nearing the year’s highs of EUR 30 mln in the August issue and EUR 31 mln the month before.
The October series bids ranged from EUR 1,500 to EUR 5 mln, with the majority EUR 25.5 mln from foreign investors.
Previous issues attracted non-EU foreign investors, keen to pump in at least EUR 300,000 to secure a residence permit or more EUR 3 mln to qualify for citizenship.
The PDMO said that the year-to-date figure has now reached EUR 182.8 mln, of which EUR 58.3 mln from Cypriot investors and EUR 124.5 mln from foreign nationals.
The reason for the drop in the September series to just EUR 3.8 mln was the reduction in the average 6-year yield to 2.79%, down from the 4% average at the launch of the programme.
Bids for the eleventh series for November will open from October 2 to 20 and will be issued on November 1.
The retail bond offer, that is restricted to individuals and supposed to have a monthly cap of EUR 10 mln, with the aim of raising EUR 100-120 mln a year, has raised EUR 243 mln for the government since the programme was launched in 2014 that has only this year returned to the markets following an austere bailout programme imposed the Troika of international lenders in 2013.
The interest rate for the 2015 series had been adjusted downwards by 0.25 percentage points and ranged from 2.50% for the first year to 5.50% in the final year. These are subject to 3% tax on interest, far more attractive than the 30% tax i mposed on bank deposit interest.
In May, the PDMO said it was lowering the interest rate on future bonds starting from the September series, to 2.5% for the first 24 months, 2.75% for 24-48 months, 3.00% for 4860 months and 3.25% for 60-70 months.
The annual coupon rate when the series was first launched in May 2014 started from 2.75% and averaged at an attractive 4% over a six-year period.