30.08.2024

On 28.08.2024, the Ministry of Finance successfully placed triple tranche bonds denominated in EUR and USD on the international capital markets. The first tranche consists of 8-year EUR-denominated bonds for EUR 1.75 billion and an interest rate coupon of 3.625%. The second tranche consists of 20-year EUR-denominated bonds for EUR 1.25 billion and an interest rate coupon of 4.250%. The third tranche consists of 12.5-year USD-denominated bonds for USD 1.5 billion and an interest rate coupon of 5.000%.

Due to oversubscription and robust investor interest, financing costs for the 8-year bonds have significantly decreased, achieving a record low of 135 basis points compared to the average interest rate swap; for the 20-year bonds, the rate was reduced to 190 basis points. The first issuance of bonds denominated in USD also garnered substantial investor attention. Throughout the placement process, the spread over benchmark US Treasury bonds was narrowed to 135 basis points. This, combined with the carefully selected time to enter the international capital markets, as well as the record low rates of the average interest rate swaps and benchmark US Treasury bonds since the beginning of the year, has led to a favourable for the country financing amid highly uncertain market environment, influenced by the ongoing foreign policy developments that create a high degree of uncertainty for the EU economy as well as for Bulgaria.

The triple-tranche bond issuance is part of Bulgaria’s Global Medium-Term Note Programme on the international capital markets. This issuance is the first time since 2002 that Bulgaria has issued bonds denominated in USD on foreign markets. In doing so, the issuer expanded and diversified its investor base and, like a number of other Central and Eastern European countries, reaped the benefits of an extremely liquid and deep US dollar bond market.

The debt transaction is within the maximum amount of BGN 11.7 billion set in the 2024 State Budget of the Republic of Bulgaria Law; out of it, BGN 10.7 billion is intended for market-oriented debt financing in the form of government securities issues. Up to the moment of issuance, the attracted debt financing for this year amounted to BGN 1.7 billion and was realized through placement of government securities on the domestic market in the period April – August 2024. The Ministry of Finance does not plan to re-enter the international capital markets until end-2024.

The completed transaction aligns with the primary objectives of debt management for 2024. In particular, these objectives include securing the necessary resources to refinance existing debt, funding the planned budget deficits and maintaining the liquidity position of the fiscal reserve.

“Bulgaria managed to place a bond loan in USD and EUR on the international capital markets under extremely advantageous conditions. The result of the placement shows that we have correctly planned the volumes and maturities to be offered to investors, the time to conduct the transaction and the currencies of the bonds. Thus, our country achieved the objectives set out in its issuance policy and diversified its investment base amid a volatile international market environment. The result of the issue also shows that foreign markets’ confidence in Bulgaria’s predictable financial and economic policy has been preserved, regardless of the dynamic domestic political environment,” Deputy Prime Minister and Minister of Finance Lyudmila Petkova commented.