Bond yields hit new record low

Cyprus government bond yields hit a fresh record low on secondary markets, despite the fact that Cyprus is not yet rated in the investment grade by international rating agencies.

The yield on the long-term bond of the Republic of Cyprus, maturing in 2025 is at 1.88% following a downward trajectory. Bond yields with maturity in 2024 are at 1.55%, while bond yields with shorter maturities are even lower, including bonds maturing in 2023 (1.35%) and bonds maturing in 2022 (1.07%).

By comparison, Portugal’s 10-year bond yield corresponding Italian bond is 2.10%.

Finance Minister Harris Georgiades said recently that “markets are ahead of the rating agencies because they have confidence in the Cypriot economy, which is in a position to borrow with lower yields than before (the crisis)”. Standard and Poor’s has affirmed Cyprus BB+ rating, with a positive outlook, which means that in 2018 the country is expected to reach the investment grade, as economic recovery continues.

Fitch rates Cyprus BB - with a positive outlook (three grades below the investment grade) and said it will issue a new rating on October 20, while Moody’s (Ba3, a positive outlook - three grades below the investment grade) will issue its own assessment on November 17. It is also estimated that the volatility of Cypriot bond yields is due to the low market depth of Cypriot bonds.

According to the data of the Public Debt Management Office, the Cypriot European bonds amount to EUR 4.5 bln.

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