10-year Cyprus bond yield at 4.47%, EUR 889 mln offers

Local and foreign investors swamped the Central Bank of Cyprus with CYP 515 mln worth of applications to buy Cyprus bonds during the multiple bond auctions held yesterday as the rush to lock in at higher yielding paper intensified on the same day that Cyprus formally applied to join the eurozone.

“It’s probably one of the last opportunities to lock in at higher Cyprus bond rates before local rates converge with those of the eurozone,” a local bond trader told the Financial Mirror immediately after the auction results were announced.

The Central Bank, acting on behalf of the Finance Ministry had asked for tenders for a total of CYP 300 mln of multiple bonds and T-bill auctions. It received a total of CYP 514.54 mln or EUR 889 mln of bids of which it satisfied a total of CYP 285 mln or EUR 492 mln.

 

— Convergence play

The result of the multiple bond auctions confirmed that Cyprus bond yields are very close to comparative German bund yields (the best benchmark in EU13) and confirms trader views that the convergence spread is fast narrowing.

The 2-year Cyprus note settled at 4.03%, five notches above the comparable 2-year German bund yield at 3.98% on Tuesday. The 5-year Cyprus note settled at 4.24% compared to 4.04% German bund yield, while the closely watched and widely followed 10-year Cyprus bond yield settled at 4.47%, compared to 4.11% of comparable 10-year German bund yields.

Central Bank Governor Christodoulos Christodoulou stressed Monday that the long term interest rates in Cyprus are 4.13% compared to the 6.24% EU average.

 

— Auction results

During the auction of up to CYP 50 mln government bonds 4.50% maturing in ten years, the total value of the bids submitted were CYP 97.008.300, of which the Central Bank accepted CYP 50 mln at an average price of CYP 100,27 per CYP 100 nominal value, representing an annual yield of 4,47%, compared to 4.37% agreed at the most recent auction held on January 2.

During the auction of up to CYP 150 mln government bonds 4.25% maturing in five years, the total value of the bids submitted were CYP 242.525.000, of which the Central Bank accepted CYP 150 mln at an average price of CYP 100,06 per CYP 100 nominal value representing an annual yield of 4.24%, compared to 4.22% agreed at the auction on January 2.

During the auction of up to CYP 50 mln government bonds 3.75% maturing in two years, the total value of the bids submitted were CYP 75 mln, of which the Central Bank accepted CYP 50 mln at an average price of CYP 99.46 per CYP 100 nominal value representing an annual yield of 4.03%. No comparative data are available since there was no auction on the 2-year notes in January.

On Tuesday, the Central Bank also tendered up to CYP 50 mln of Treasury Bills maturing in 13 weeks. The total value of the bids submitted was CYP 100 mln of which the Central Bank accepted only CYP 50 mln at the weighted average price of CYP 991,20 per CYP1.000 nominal value representing an annual yield of 3,56%, which was slightly down from 3.60% yield agreed at the auction held on January 2.