27.03.2012

On 26 March the Ministry of Finance for a second time since the beginning of the year reopened the 2-year GS, which have the shortest term maturity among those issued in 2012. The MoF offered for sale GS with nominal value BGN 35 million, while the orders amounted to BGN 92.6 million, thus the registered coverage coefficient was 2.65. By comparison, at the previous auction held on 06.02.2012 demand was for BGN 84.75 million and the SG amount offered - BGN 20 million.

The result reaffirmed the obvious downward yield trend since the beginning of the issuance year. The weighted average of the annual yield of all orders is 2.23%, while that of the auction held on 06.02.2012 is 2.51%. The decline of 0.28% has been achieved on the background of the increased volume of GS offered for sale. The approved weighted average of the annual yield is 2.11%, while for the previous auction it is 2.36%. The yield of the issue is historically the lowest one for Bulgarian interest bearing government bonds. It is comparable with the yield of Euro area countries Euro bonds with similar residual maturity and significantly lower than the yield of local currency denominated bonds of Turkey (9.41%), Romania (5.99%), Poland (4.54%). Another very positive indication is the narrowing of the spread to the German Government Bonds to 186 b.p., while for the previous auction it is 216 b.p. 

All GS primary dealers took part in the auction held yesterday. In addition to the traditionally high interest of banks in the short end of the debt curve, interest also showed pension and investment funds. The investor base for the amount approved is as follows: banks - 70%, investment and guarantee funds - 19% and pension funds - 11%.

This is the fourth consecutive auction in March 2012 where a record breaking lowering of the yield is observed. The MoF offered this month SG issues covering the whole spectrum of the debt curve - 2, 5, 7 and 10.5 years, denominated both in BGN and in Euro. The whole maturity spectrum coverage by offering GS of diverse characteristics has helped to build a high liquidity benchmark curve of Bulgarian Government Bonds.

The results demonstrate increased investor confidence and interest in the GS auctions, evidencing clearly the security of investing in Bulgarian sovereign bonds. The issuer's policy is focused on offering GS in all maturity segments in order to answer as much as possible the expectations stated by investors and to provide a possibility for investor base diversification.