Cyprus raises €1 billion with 5-year bond

The government of Cyprus on Tuesday raised €1 billion with the sale of a five-year Euro Medium Term Note (EMTN).

The debt security sale is part of the planned issuance by the Cyprus finance ministry. EMTNs are designed for repeated sales without requiring complex documentation and registration each time.

The issue was competitively priced with initial guidance at +60 basis points, but this was revised down later in the sale to mid swap (ms) +50 to 55 basis points.. It was oversubscribed with offers at €8.5 billion from retail and professional buyers both. The notes are to be listed on the London Stock Exchange.

Markets are still confident in Cyprus bond issuance, and the asset purchase programme underway at the European Central Bank helps to create favourable market conditions. The funds raised will be used for the refinancing of the debt (T-Bill) that the state had borrowed from domestic banks in April 2020, amounting to €1.25 billion.

The government had instructed investment banks Barclays, BNP Paribas, JP Morgan, Morgan Stanley and Société Générale to lead the issue.

The successful bond sale followed similarly oversubscribed sales of EMTN tranches in April

Two new benchmark-sized Euro Medium Term Notes were sold then for a total amount of €1.75 billion.

The €1.25 billion 7-year EMTN was priced at spread of 165 basis points over the mid-swap rate and the €0.5 billion 30-year EMTN was priced at a spread of 215 basis points over the mid-swap.

The combined orderbook reached €2.6 billion (€1.8 billion for the 7-year Note and €0.8 billion for the 30-year Note).

This EMTN issuance was designed to increase the liquidity to face the economic challenges of the pandemic crisis. They helped to finance the extensive government support to households and business that has been provided

Further EMTN issuance may be expected in the coming months as the government continues to tap the markets, which are giving an excellent reception to Cyprus government paper.