13.12.2011

Yesterday, 12 December 2012, the Ministry of Finance held the last GS sale auction for 2011 by reopening the benchmark 10.5-year issue of GS. The total volume of this issue of priority for Bulgaria reached almost BGN 323 million after this auction. The issue has been used as the basis for calculating the harmonised long-term interest rate to evaluate the level of convergence which is one of the Maastricht criteria.

In the conditions of global insecurity and strong volatility of capital markets, the yield of long-term Bulgarian GS remains stable by 5.30% average weighted yield. In a situation of improving yield of the sovereign debts of a number of European countries, preserving the yield of the long-term domestic debt outlines Bulgaria and confirms its acceptance by the investment community as a country of budget austerity.

A reduction in the spread is reported compared to German federal bonds. At BGN 60 million GS offered for sale, the total nominal value of the bids from primary dealers reached almost BGN 105 million, with the coverage ratio being 1.73.

Resulting from the grater interest shown by institutional clients in this maturity segment and in order to encourage the investor base development, MoF approved all non-competitive bids. Thus, the nominal value of the approved amount of GS amounts to BGN 65 million. The decision of the issuer corresponds to the strong demand of GS reported for this auction from institutional investors seeking to replenish their investment portfolios at the end of the year.

The analysis of the investor base shows a leading participation of insurance companies acquiring 42 per cent of the approved amount. 38% are acquired by pension funds, while 17 per cent by banks and other investors.

The outcome of this last GS sale auction for 2011 confirms Bulgaria\'s status of a predictable debt issuer. The positive trends in government debt management allow maintaining an optimal price of state financing. This contributes to the reduction in the government debt servicing costs and is a prerequisite for preserving the low tax burden in the long run.