10.05.2011

To meet investor demand by offering instruments within the whole debt curve range the Ministry of Finance carried out an auction for the sale of discount government securities (GS) with maturity 6 months yesterday. At the auction for the sale of short-term GS to the amount of BGN 25 million the subscription was BGN 60.5 million or demand exceeded supply almost 2.5 times.

Despite the high demand of investors in Bulgarian domestic debt the Ministry decided to approve smaller than the offered amount of GS. Orders amounting in nominal terms to BGN 1.8 million have been approved, which corresponds to average weighted annual yield of  1.38%.

The decision of the Ministry is in line with the absence of temporary short term imbalances in state finance liquidity and the current prospects regarding the budget balance, as well as the current macroeconomic situation in the country. Taking account of the availability of appropriate conditions, refraining from borrowing should be an additional liquidity incentive in the financial system and thus an incentive for credit growth in the real sector.

The positive downward trend of the spreads to German Bunds across all maturity segments continues. The spread to German Bunds with similar maturity is around 0.23%. This is the lowest spread to German Bunds ever registered on the primary market.

As basic positive results could be mentioned the diversification of the maturity and currency structures of the newly issued GS in some of the sovereign benchmark curve key points, the continuing active policy in government debt management, as well as the investor appreciation of Government efforts in respect of fiscal consolidation and the intention to bring the expected budget deficit below the target planned.