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POPULARITY OF 10- AND 15-YEAR BONDS EXCEEDED EXPECTATIONS

Fixed-rate bonds hint at a strong future

IMPROVING economic performance has secured Slovakia access to cheaper loans on international markets. The new EU member, praised for its progressive reforms, floated a 10-year €1 billion Eurobond issue on May 7.
"This has been the best issuance of Eurobonds that we have managed to place so far - considering its length and volume, as well as the excellent yield," said Daniel Bytčánek, director of the Debt and Liquidity Management Agency (ARDAL).


THE LATEST Slovak bonds were a release to watch.
photo: TASR

IMPROVING economic performance has secured Slovakia access to cheaper loans on international markets. The new EU member, praised for its progressive reforms, floated a 10-year €1 billion Eurobond issue on May 7.

"This has been the best issuance of Eurobonds that we have managed to place so far - considering its length and volume, as well as the excellent yield," said Daniel Bytčánek, director of the Debt and Liquidity Management Agency (ARDAL).

According to the Finance Ministry, the issue was floated on exceptionally advantageous terms, with Slovakia's country premium at a mere 33.5 basis points, putting it 0.335 percent above German government bond yields.

"During the maturity of the Eurobond issue, the state budget will save about Sk2 billion (€50 million)," Slovak Finance Minister Ivan Mikloš told the press.

"The low risk surcharge and investors' appetite for the 10-year release have affirmed Slovakia's reforms," Mikloš added.

The fixed yield to maturity should bring additional savings for the country, as the interest rates of 10-year euro-denominated debt are expected to rise considerably, the news wire SITA wrote.

Investors oversubscribed the Slovak Eurobond auction when their bids climbed to almost €2.6 billion, indicating enormous interest in the security.

The Slovak Eurobond attracted investors from Germany, the Benelux countries, Great Britain, Norway, Spain, and Asia. The buyers were central and commercial banks, investment funds, and insurers.

The Eurobond is part of the country's plan to gradually convert Slovak debt to euros as the country moves to adopt the single currency at the end of the decade, Reuters reported.

"I think the release was reasonable," Ján Tóth, the main analyst with ING Bank, told the daily SME.

However, he says the main issue is the development of the Slovak crown's exchange rate during the coming years.

"If the next elections give Slovakia a government with reasonable economic policies, the crown will further strengthen and, thanks to that, the loan might be even more advantageous," Tóth said.

On May 10, Slovakia floated and auctioned 15-year government bonds for the first time in history.

The Finance Ministry and ARDAL plan was to include investors outside the banking sector and concentrate on insurance companies that prefer long-term investments with a fixed interest yield.

"Investors oversubscribed the issue with bids of Sk6 billion (€149 million), which brought us a pleasant surprise, as our estimates varied between Sk3 and 4 billion (€75 to 100 million)," said Bytčánek.

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