Re­tail bonds pick up again, 28 mln sold, says PDMO

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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