24.01.2012

The Ministry of Finance reopened yesterday the issue of 7-year GS since 2010 with residual maturity of 5 years as of the date of reopening. The total volume of the received offers reached almost BGN 147 million with offered amount of BGN 50 million, while the bid-to-cover ratio of 2.94 is the highest one registered since October 2010. In response to the extremely high interest of institutional investors in the auction, the Ministry of Finance decided to approve all offers amounting to BGN 38.52 million. As a result, the total amount of the GS approved at the auction reached BGN 63.52 million. Investor base allocation of the approved amount is as follows: banks: 33%, insurance companies: 31%, pension funds: 14%, etc.

The volume of the issue in circulation after this auction has reached BGN 363.8 million, which consolidates the benchmark bond status and further encourages its liquidity on the secondary market. Thus, a new drop in the yield of the medium-term segment of the government debt has been registered after the successful offering of the two new long-term benchmark bonds of the Bulgarian government with maturity of 10.5 and 7 years respectively.

After the reported drop in the yield of GS sale auctions of euro zone members, the average weighted annual yield of 3.96% of yesterday's auction has been the lowest one so far for this issue. For comparison, it was 4.23 per cent in November 2011, while the reported average weighted annual yield of 5-year euro-denominated GS issued in 2011 is 4.03%. The auction yield registered is also far below the current one for euro bonds with similar residual maturity of euro zone members with sustainable public finance like Slovakia (4.64%) and Slovenia (5.90%), while being at almost the same level as the newly issued 5-year euro bonds of Poland (3.92%) and significantly below the level of the rapidly developing economy of Turkey (5.35%).

Taking account of the positive development of the domestic debt market, the Ministry of Finance will continue providing the requisite budget financing at a issuer-optimum price. The drop in the cost of government financing enables an optimization of debt service costs, which is a condition for preserving a low tax burden in Bulgaria in the long run.