24.07.2012

The Ministry of Finance reopened an issue of 10-year government securities (GS) at a record low average weighted yield of 3.49 per cent. At the auction held on 23 July 2012, the bids approved amounted to BGN 35 million, with the bid-to-cover ratio reaching 4.91 times for a second successive auction. The bond was issued on 16 January 2008 and its maturity falls on 16 January 2018, with its residual maturity being around five and a half years. That is how just within seven days Bulgaria reaffirmed its status of one of the most stable issuers in the EU.

At the first reopening of the issue in April 2012 the weighted annual average yield was 4.12%, while the weighted annual average yield reached at the last auction held for this issue at end-2008 was 7.36%. The fact that despite the longer maturity of the issue its yield became equal to that of the 5-year bonds is an extremely positive signal. Just for comparison, the primary market yield of the Bulgarian issue is lower than the one registered at the latest auctions of bonds with a shorter maturity in 2017 held in other states - Spain (6.46%), Italy (5.84), Hungary (7.73%), Poland (4.79%). Respectively, the bid-to-cover ratio indicating investor interest is higher than that of all the countries mentioned. The yield of this issue is lower than that of the EUR-denominated issues of similar residual maturity issued on the international capital markets in a number of EU members - Hungary (7.25%), Spain (7.07%), Croatia (5.71%), Romania (5.43%), Slovenia (5.21%), Lithuania (3.80%), and is comparable to that of Latvia.

Investor demand exceeded the bids offered in both the competitive and non-competitive segment. With BGN 35 million offered, the bids amounted to BGN 172 million (BGN 116.5 million competitive bids and BGN 55.5 million non-competitive ones). All the key investors in Bulgarian domestic government debt took active part in the auction. The greatest share of GS was acquired by pension funds, around 49%, followed by banks with around 21%, trusts and guarantee funds and investment intermediaries with around 28% and insurance companies with around 2 per cent. The volume of the issue in circulation after this auction totals BGN 245.7 million.

Holding this auction coincides with the publication of Eurostat data about the general government debt-to-DGP ratio for Q1 of 2012. Here Bulgaria continues being second after Estonia with the lowest debt burden across the EU.