Slovenia facing ‘excessive’ default risk, EU warns
LJUBLJANA, SLOVENIA — Slovenia’s default risk jumped after the country missed its target at a debt offering, reigniting concern that it will become the next euro nation to need international assistance.
The cost of protecting Slovenian debt against non-payment using credit-default swaps rose to the highest in six-months Wednesday, according to data compiled by Bloomberg. The yield on Slovenia’s dollar-denominated benchmark bond maturing in 2022 surged to near-record levels.
The Alpine nation is battling a deepening banking crisis as the second recession in four years swells the stock of bad loans at state-owned lenders such as Nova Ljubljanska Banka. While Slovenian Prime Minister Alenka Bratusek’s government pledged to do “everything in its power” to avoid the bailout, the European Union Wednesday singled out Slovenia alongside Spain as facing “excessive risk.”
“Bratusek’s comments were easily dismissed by the market, given the continued lack of detail on the bad bank plan and on fiscal consolidation,” Abbas Ameli-Renani, an emerging-markets strategist at Royal Bank of Scotland Plc in Lon- don, said in an email.
“(Wednesday’s) poor auction was reflective of the low appetite in the local banking sector for government T-bills.”
Credit-default swaps, which reflect the perception of the nation’s creditworthiness, advanced 25 basis points to 369 basis points Wednesday.
CDS reached a six-month high of 412 basis points on March 28, according to data compiled by Bloomberg. The yield on the benchmark dollar bond, which dropped to a two-week low of 5.6 per cent on April 5, surged 55 basis points in the past two days to 6.25 per cent. It reached a recordhigh 6.38 per cent on March 27.