Slovenia Issues €1bn of 30-Year Bonds Under Favourable Terms

By , 15 Oct 2020, 12:05 PM Business
Triglav in your pocket on the 50 cent coin Triglav in your pocket on the 50 cent coin Photo: Bank of Slovenia

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STA, 13 October 2020 - Slovenia issued EUR 1 billion-worth of 30-year bonds on Tuesday, the business paper Finance said in a report referring to Bloomberg data. Unofficially, the interest rate for the bonds is slightly under 0.5%, while the yield also stands at around 0.5%.

According to unofficial sources quoted by Bloomberg the interest rate for the issue is 50 basis points above the 30-year mid-swap rate, which stands at -0.005%. Bloomberg said this means a better result than planned, as the financial institutions commissioned for the issue by the state had expected 65 basis points.

Bloomberg said demand reached EUR 5.75 billion, while the yield is 0.493%.

Ministry said that compared to the country's portfolio, the bond has the longest outstanding maturity. Compared to previous euro-bond issues, this issue stands out in terms of its contribution to prolonging the average binding period of state debt, the lowering of average interest rate and the strengthening of investor dispersion, both in terms of geography and type.

Most investors, 22%, were from Austria and Germany, 14% from the US, 13% from the UK and France, 8% from Slovenia, 7% from Switzerland, 5% from Scandinavia and 16% from the rest of Europe.

By type, the majority of investors, 71%, were fund managers, pensions funds and insurance companies, and 21% of investors were banks, the ministry also said.

"The successful issue of the 30-year bond is proof that long-term trust has been established and that Slovenia remains an investment-safe country despite the challenges of the Covid-19 pandemic," the ministry added in a press release.

Barclays, BNP Paribas, Commerzbank, Goldman Sachs International, JP Morgan and Unicredit Banka Slovenija were mandated to manage the issue.

The same banks were mandated by the treasury last week to buy back two outstanding bonds with a combined value of EUR 2.6 billion that are due in 2021 as Slovenia seeks to reduce the interest it pays on its debt. Today's update on the basis of offers received is that Slovenia plans to buy back bonds worth EUR 172.98 million nominally in total.

Slovenia has raised almost EUR 6 billion this year through new bonds and supplemented existing issues, while also auctioning off a few T-bills. A major part of the funds went for measures related to the coronacrisis.

Despite the economic situation and increased debt, the interest rates on Slovenian debt have fallen. Moody's recently upgraded Slovenia's long-term issuer and senior unsecured bond ratings by one notch to A3 from Baa1, while Fitch and Standard & Poor's kept Slovenia's credit rating unchanged in recent months.

According to Bloomberg, Slovenia's longest bond issue (25 years) currently has a yield of 0.40% on the secondary market, which is the lowest yield in history for the country. The yield for 10-year bonds is meanwhile -0.10%.

When Slovenia issued a 30-year bond five years ago, the interest rate demanded by investors was 3.125%.

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