11.09.2012

The Ministry of Finance registered a new historical minimum for the yield of long-term government securities (GSs). The auction held on 10 September 2012 for securities of the 7-year euro-denominated issue reached a weighted average annual yield of 2.91%, with the offers proposed and approved amounting to EUR 30 million. This is the third reopening of the securities issued on 18 January 2012 and maturing on 18 January 2019, and the total nominal value of this issue has reached EUR 95 million after this auction. When placing the issue at the beginning of this year, the yield for these GSs was 4.45%, while it reached 4.21 per cent when reopening it in March.

The parameters achieved on 10 September 2012 preserve the trend of reduction in the yield of Bulgarian long-term government securities. A record low yield of 4.12% of the 10.5-year issue of GS, which is the benchmark for determining the long-term interest rate, was registered on 13 August 2012. The yield even reached 3.88 per cent in the subsequent transactions on the secondary market. By doing so, the lowest yield for various issues of long-term Bulgarian bonds was registered within less than a month.

Another positive indicator of the auction held on 10 September is the sizeable narrowing of the spread against the German federal bonds which are considered risk free. This spread against the German bundes bonds of similar maturity is around 210 basis points, while this is one of the lowest figures registered on the primary market in this maturity segment. The yield of the auction is lower than the current yield of bonds with similar features of Slovenia (6.20%), Hungary (6.18%), Croatia (5.78%), Spain (5.25%), Italy (4.50%), Turkey (3.50%), etc.

The auction has again registered great investor interest. The offers placed have totaled EUR 110.46 million, with the bid-to-cover ratio being 3.68. This is the highest value of this indicator ever registered for this issue. There was active participation from the pension funds, purchasing half of the quantity offered, the banks registering around 39%, insurance companies - 8%, trusts and guarantee funds - 3%.