2024-08-30 11:35:32
Acting Finance Minister Ludmila Petkova believes that trust in Bulgaria was preserved, despite the political instability
For the first time in years we are also issuing in dollars and not just euros to diversify our debt portfolio
With the operation, we will finance deficits and payments on old debt planned by finance
Yesterday, in complete discretion, the finance ministry placed on the international capital markets treasury bonds in three tranches, denominated in euros and US dollars. This became clear from a message on the department’s website.
The first tranche consists of euro-denominated bonds with a maturity of 8 years, a volume of EUR 1.75 billion and an interest coupon of 3.625%. The second tranche consists of euro-denominated bonds with a maturity of 20 years, a volume of EUR 1.25 billion and an interest coupon of 4.250%. The third tranche consists of bonds denominated in US dollars with a maturity of 12.5 years, a volume of 1.500 billion US dollars and an interest coupon of 5.000%.
Oversubscription levels and strong investor interest allowed the cost of funding for 8-year bonds to drop significantly to a record low of 135 basis points over the weighted average interest rate swap, and for 20-year bonds to 190 basis points.
The debut issue of bonds in US dollars also caused increased investor interest, and in the process of placing the papers, the spread against the reference US bonds was reduced to 135 bp. This, combined with carefully timed exits to international capital markets, as well as year-to-date record lows for average interest rate swaps and benchmark US Treasuries, has resulted in favorable sovereign funding in a highly uncertain market environment influenced by from the ongoing processes in foreign policy, creating a high degree of uncertainty for the EU economy and for Bulgaria, the finance department explains.
The triple tranche of bonds is part of the Medium-term global program for issuing debt on international capital markets, and for the first time since 2002, the Republic of Bulgaria has issued bonds on foreign markets denominated in US dollars. In this way, the issuer expanded and diversified the investor base and, like a number of other Central and Eastern European countries, took advantage of the extremely liquid and deep bond market in US dollars.
The debt operation is within the maximum amount of BGN 11.7 billion laid down in the Law on the State Budget of the Republic of Bulgaria for 2024, of which BGN 10.7 billion is intended for market-oriented debt financing in the form of issues of government securities.
Until the moment of the issue, the attracted debt financing for this year is in the amount of BGN 1.7 billion and was realized by placing government securities on the domestic market in the period April – August 2024. Until the end of 2024, the Ministry of Finance does not plan another exit to the external capital markets.
The realized transaction follows the set main goal of debt management in 2024, and in particular providing the necessary resources for refinancing the debt in circulation, financing the planned deficits of the state budget and ensuring the liquidity position of the fiscal reserve.
“Bulgaria was able to place a bond loan in dollars and euros on the international capital markets under extremely favorable conditions. The result of the placement shows that we have correctly planned the volumes and maturities to offer to investors, the time in which to conduct the transaction and the currencies in which to issue the bonds. In this way, our country achieved the goals set in its emission policy and diversified its investor base in the conditions of a volatile market environment internationally. The result of the issue also shows that the confidence of the foreign markets in the predictable financial and economic policy of Bulgaria is preserved, regardless of the dynamic domestic political environment”, commented the Deputy Prime Minister and Minister of Finance Lyudmila Petkova.