CYPRUS: Bond yields hit new record low

Cyprus government bond yields hit a fresh record low on secondary markets, despite the fact that Cyprus is not yet rated in the investment grade by international rating agencies.

The yield on the long-term bond of the Republic of Cyprus, maturing in 2025 is at 1.88% following a downward trajectory.

Bond yields with maturity in 2024 are at 1.55%, while bond yields with shorter maturities are even lower, including bonds maturing in 2023 (1.35%) and bonds maturing in 2022 (1.07%).

By comparison, Portugal’s 10-year bond yield is 2.38%, while the yield of the corresponding Italian bond is 2.10%.

Finance Minister Harris Georgiades said recently that “markets are ahead of the rating agencies because they have confidence in the Cypriot economy, which is in a position to borrow with lower yields than before (the crisis)”.

Recently, Standard and Poor’s has affirmed Cyprus BB+ rating, with a positive outlook, which means that in 2018 the country is expected to reach the investment grade, as economic recovery continues.

Fitch rates Cyprus BB – with a positive outlook (three grades below the investment grade) and said it will issue a new rating on October 20, while Moody’s (Ba3, a positive outlook – three grades below the investment grade) will issue its own assessment on November 17.

Experts believe that the low-yield environment in Europe will continue until the European Central Bank gives clear indications that it will gradual end the quantitative easing programme, which squeezes the yields.