09.10.2012

The yield of 0.54% achieved on the 2-year issue at the auction held yesterday is historically the lowest ever registered at an auction for the sale of Bulgarian government securities. The serious downward trend observed in the long term segment of the debt curve found yet another even clearer display, the registered drop in the yield on the bond maturing on 08.02.2014 was 1.46 p.p. compared to the auction of the same issue in June, when the yield was 2.01%. When the issue was launched in February 2012 the yield was 2.36%.

This is the last planned reopening of the bond in 2012 issue year. Its total volume in circulation after yesterday's auction reached BGN 140 million. The volume of orders totalled BGN 123.7 million while the quantity offered and approved for sale was BGN 30 million, thus the coverage coefficient being 4.12. The distribution by type of investor is as follows: banks - 70%, other institutional investors - 17.80% и pension funds - 12.20%.

This yield is below the current yield of bonds of similar characteristics in a number of EU Member States and countries in the region: Sweden (0.64%), Ireland (1.32%), Italy (2.20%), Slovenia (2.37%), Spain (3.02%), Portugal (3.37%), Poland (3.98%), Hungary (6.11%), Turkey (7.41%), etc. Despite the exceptionally low yield levels of the considered by investors non-risk benchmark Bunds, the spread thereto has narrowed to the record 0.56 p.p. These values are well below the value of the 5Y CDS indicator, which takes account of the insurance premium against insolvency of the issuer, which on its turn shows that in the yield achieved at the auction no risk premium has been incorporated.

Most recent data show that the long term interest rate of Bulgaria has lowered from 4.28% in August to 3.80% in September. For comparison - at the beginning of the year the value of this indicator was 5.30% in January. These values reflect the yield level at which the long term 10-year Bulgarian bonds are traded on the secondary market. These indicators yet again demonstrate the trust of investors in Bulgaria as a country with stable public finances.