FIVE-YEAR GOVERNMENT BOND YIELD DROPS TWO TIMES COMPARED TO JUNE 2009
20.03.2012
The Ministry of Finance offered yesterday for a second time this year the 10-year GS of 2007. The yield of 3.71% reported in the first reopening of the securities on 20 February 2012 had been the lowest one in the five-year BGN maturity segment since 2005. The outcome of this auction improved this seven-year record, with the average weighted yield reaching 3.48%, which is significantly lower than the yield of the same issue reached in the previous month. The spread against German federal bonds of similar residual maturity is 242 basic points, also registering a drop by 38 basic points.
Auction demand exceeded the amount offered for sale by two times, with banks securing their leading position in this maturity segment by acquiring 68% of the approved securities volume of BGN 50 million. The issue in circulation after this auction totals BGN 350 million, which is a prerequisite for promoting its liquidity and turning it into a benchmark on the domestic debt market.
The trend ongoing since the start of 2011 of lowering the GS yield has been observed most clearly in the medium-term maturity segment, with 58% of the securities issued since 2012 falling in this category. For comparison, the yield on the primary market of 5-year GS reached 6.87% in June 2009, or almost two times higher than that of the auction. The yield of the BGN-denominated bond is below the current one of the 5-year Euro bonds of a number of European countries: Hungary (8.15%), Turkey (4.37%), Slovenia (4.00%), Italy (3.85%), Spain (3.71%) and is getting close to Slovakia (3.36%) and Poland (2.94%).
In a situation of continued problems on EU debt markets, the positive outcome achieved on the Bulgarian government debt market is an assessment of its own of the fiscal policy pursued by the Bulgarian government and places our country among a group of few countries with sustainable finance. Outlining Bulgaria as an austerity country provides for market-oriented financing and contributes to the development of an effective and liquid market of Bulgarian GS.