CYPRUS: Demand for 6-year retail bonds up again, rises to €10.7m

Demand for the 6-year Cyprus government retail bonds, a low-tax scheme launched last year to boost state coffers, picked up again with the Public Debt Management Office (PDMO) announcing it received applications worth €10.71 mln for the third series of the 2015 bonds for March.

The PDMO said the issue was oversubscribed as a total of 57 investors applied for €10,718,400, thus exceeded the monthly target of €10 mln, with the state aiming to earn €120 mln a year.
Of the applications, 54 were by Cypriots and three by foreign investors who accounted for about €7 mln. The average value of applications reached €188,042.
The PDMO said that the fourth series of six-year bonds will be issued on April 2 and the period for applications will be March 2-20.
Demand for the February series dropped to €9.4 mln, down from the record €36.7 mln in December.
The 2015 issue carries a staggered interest rate that averages 4% over six years and has so far raised just under €130 mln for state coffers in ten monthly issues, as the government has resorted to alternative means to raise funds ever since it was shunned by markets due to the recessionary economy and only returned last year.
The government’s aim was to attract about €10 mln a month, while non-EU investors are lured with the incentive of securing a permanent residency permit.
The Public Debt Management Office at the Ministry of Finance said that the ninth series attracted 35 bidders for €9,375,600 of which only two were foreign investors, but they offered €7.5 mln, or about 80% of the total value.
Depending on the holding period, the 2015 issue offers an annual interest rate of 2.5% for holding the securities up to 24 months and gradually increases to 5.5% for a minimum of 60 months holding.
The annual coupon rate for the 2014 series started from 2.75% and averaged at an attractive 4% over a six-year period, with a minimal 3% income tax on the interest, far better than the 30% imposed on all interest-yielding products.