22.11.2011

Bulgaria is the only EU Member State recording a drop in its long-term interest rate for a fourth month in succession. According to the harmonized long-term interest rate published on 11 November by the European Central Bank on the basis of the 10-year government bond yield, it has dropped from 5.39% down to 5.27% in the period June-October 2011. According to ECB data, nine EU Member States have a figure higher than that of the Bulgarian long-term interest rate, while two of the Member States have an interest rate very close to the Bulgarian one. Three more Member States only enjoy a reduction in the interest rate as against the previous reporting period.

The outcome of the auction held on 21 November to sell the 7-year bond issued in 2010 is in unison with the steady stabilization of Bulgaria's long-term debt dynamics and the dropping yield on the secondary market. The residual period of the issue as of the date of reopening is 5 years and 3 months, which explains the higher demand of investment alternatives in the medium-term segment of the debt curve in recent months.

The trend of reducing the yield on the primary market has been preserved, which resulted in a record drop in the weighted average annual yield of this issue. A yield of 4.23% was registered for the approved volume of BGN 50 million as against 4.40% in the transitional reopening of the issue in September. The highest yield of this issue is 6.09%. This yield is better than the current yield of euro denominated euro bonds of similar residual maturity of Hungary (7.96%) and Turkey (4.86%).

Orders of nominal value of BGN 121.9 million were submitted to the auction, while the orders exceeded the offered quantity by almost twice and a half. There was a very strong interest by the banks that are primary dealers in GS, having made orders on their behalf and at their expense, as well at the expense of clients of theirs. The outcome of the analysis on investor base shows that in addition to the banks having acquired 43.10% of the total approved face value, there was a strong interest by institutional investors such as pension funds (35.13%), insurance and life insurance companies (11.90%) and other investors (9.87%).