Cyprus Mail

Good news for ten-year bonds

Finance Minister Harris Georgiades

By Gregoris Savva

CYPRIOT ten-year bond yields fell to the lowest point since March 2012, a year after the island agreed with international lenders on a €10 billion bailout.

“There could not be a safer and clearer sign that the Cypriot economy is on the right path,” Finance Minister Harris Georgiades said.

The yield on the ten-year bond maturing on 2020 dropped to 5.6 per cent from the all time high of 16.4 per cent in June 2012, when Cyprus sought a bailout after being shut out of international markets for almost a year.

Theodoros Alepis, director of investment and energy strategy at the Bank of Cyprus, told the Cyprus News Agency that the downward trend could be attributed to the improvement in Cyprus’ public finances as well as the existence of excessive liquidity in international markets.

“Implementation of the adjustment programme is on track, the public finances are going well, and this is reflected by the investors,” he said.

Alepis added that currently there was a lot of cheap money in the markets due to the US Federal Reserve’s quantitative easing which pushed bond yields down in general.

Cyprus’ bond yields entered a downward path after June when the island applied for a bailout from the EU and the IMF and spiked again upwards when it transpired that the terms included seizure of bank deposits, raising investor fears of a default.

However, following three successful programme reviews by the island`s lenders and the first upgrade by Standard and Poor’s last November, yields followed a downward trend anew reaching 5.6 per cent.

The yield of the German bond, considered a benchmark, stood at 1.61 per cent, Ireland’s yield for its ten-year bond is at 3.0 per cent and Spain’s at 3.2 per cent. Cyprus’ yield is lower than Greece’s ten-year bond yield maturing in 2024.

Alepis said Cyprus remained connected with Greece in the eyes of investors despite the fact that as part of the bailout the Cypriot banks sold their operations in Greece, noting that a Greek bond issue, which is rumoured to come before the Easter holidays, will help Cyprus.

The Cypriot Public Debt Management Office aim to tap the markets between the last quarter of 2015 and the first quarter of 2016, when the credit line by its international lenders expires.

An IMF staff report on Cyprus notes that the island would have to repay debt of approximately €8 billion between 2016 and 2020. (CNA)

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