(Corrects yield of 7-year bond in fourth paragraph)
By Stelios Orphanides & Angelos Anastasiou
Finance minister Harris Georgiades said that the government issued a €1bn 10-year bond at an average yield of 4.25 per cent today, a move that signals the final restoration of market access following the €10bn March 2013 bailout.
“We had a successful issue of a 10-year bond and we borrowed €1bn at a rate of 4.25 per cent,” Georgiades told reporters in Nicosia today.
“It is the lowest rate at which the Republic of Cyprus ever issued a 10-year bond and €450m (of the money borrowed) will be exchanged with bonds maturing in 2019 and 2020, while the other €550m will strengthen the government’s cash reserves in the near future after Cyprus exits its adjustment programme”.
It is Cyprus’ third successful market test after the country was shut out of markets in May 2011. The government issued a €750m five-year bond at an average yield of 4.85 per cent in June 2014 and a €1bn 7-year bond in April 2015 at an average yield of 4 per cent.
“What I want to stress is that Cyprus’ creditworthiness has been essentially restored,” Georgiades said. “I wouldn’t use the word ‘definitely’ since, as we have found out, there is in the economy nothing definite unless it is supported by a prudent and credible policy,” he said.
“This is the policy we applied in the past two years and has contributed to the restoration of the credibility of our country and we need to carry on with it”.
According to a statement issued late on Tuesday by the Finance ministry, the goal of the issue was to “further extend the interest-rate curve, mitigate refinancing risk through the easing of the debt-maturity timeline, improve relations with the investing public, and broaden the base of investors”.
“The order book recorded offers over €3.35 billion, which is the largest sum of offers the Republic of Cyprus has seen since its return to international markets in 2014,” the statement said.
The Finance ministry said there had been high international demand, with investors from the UK forming over 60 per cent of the final issue.
Fund managers and banks, it added, also featured strongly, comprising 52 and 23 per cent of the final issue, respectively.
In a speech at a charity gala organized by RCB bank on Tuesday night, President Nicos Anastasides congratulated Georgiades for the successful issue, noting that after four years in recession, the Cypriot economy returned to growth.
“Prudent policies have culminated in today’s exit to the markets and the restoration of Cyprus’ creditworthiness,” Anastasiades tweeted earlier in the day.
“We shall continue this way.”
Cyprus is rated B3, BB- and B+ by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings respectively. All ratings are below investment grade. On Monday, the public debt management office said that holders of the €750m bond maturing June 25, 2019, the €1bn bond maturing on February 3, 2020 and the €100m bond maturing on May 2, 2020, could exchange their bonds with today’s issue.
In March, Cyprus is scheduled to successfully complete its economic and financial adjustment programme agreed in March 2013.