26.07.2011

Yesterday the Ministry of Finance successfully reopened the BGN-denominated 3.5-year government securities issue, the volumes offered at the auction being for BGN 30 million and the total nominal amount of received bids reaching BGN 65.75 million. The achieved coverage ratio of 2.19 is the highest one for the last three auctions for this issue. There was strong demand for the issue on behalf of the banks primary and non-primary dealers of government securities.

The average weighted annual yield achieved at the auction is 3.53%, while the spread compared to German federal bunds with similar residual maturity is about 1.71 percentage points. The yield level is below the current value of the index 5Y CDS of Bulgaria, which takes into account the assessment of international markets on the issuer default risk (about 220 bp) and shows that market participants have not required any currency risk premium. The achieved yield is below the current one of EUR-denominated Eurobonds with similar residual maturity of a number of CEE countries - Lithuania (3.57%), Turkey (3.84%), Croatia (4.01%), Hungary (4.62%) and Romania (4.88%).

The auction outcome is an indicator of the confidence of local investors and an appraisal of the efforts of the Bulgarian government to conduct prudent fiscal policy as well as of its commitment to impose strict fiscal rules. Under the conditions of highly unstable debt markets, Bulgaria is the only country in Europe whose credit rating was upgraded in 2011 by the leading international credit rating agency Moody's Investors Service, which late last week raised Bulgaria's sovereign debt rating from Baa3 to Baa2. The independent assessment strengthens the status of Bulgaria as one of the most stable issuers in the region and creates objective prerequisites for the Ministry of Finance to expect even more visible reinforcement of the positive trends on the market of Bulgarian government securities in the short term.  

The Ministry of Finance will continue its efforts to maintain these positive trends, as well as to pursue a maximum transparent market-oriented policy on government debt management. In response to the investors' interest, in the remaining months of 2011 it will offer a new instrument to market participants - it will reopen on an auction principle a 7-year government securities issue of 2010 with an estimated residual maturity of 5.5 years.