Cyprus’ first 30-year bond sale was inundated with orders on Wednesday, as Nicosia tapped the markets to raise money to pay-off a 2011 Russian loan worth €2.5 bln.
Cyprus began marketing five-year and its first ever 30-year bonds, and already demand has exceeded €9 bln, split evenly between the two maturities, Reuters reported.
Nicosia seeks early repayment of the €2.5 bln loan it obtained in 2011 from Moscow to avert financial crisis as it became locked out of markets. The loan’s outstanding amount is €1.57 bln.
“Cyprus is viewed positively by international markets and this has been proven recently…not many states can issue such long-term bonds and we seek early settlement of the Russian loan in full,” Finance Minister Harris Georgiades said earlier Wednesday.
“Today’s response shows we can stand alone with confidence and by the end of the day we will have an exceptional response to our double bond issue, confirmation that our fiscal debt and deficit is viable,” he added.
The demand for 30-year debt from a country that needed a bailout from the European Union and International Monetary Fund just five years ago is remarkable and says as much about the state of the European economy and bond market as Cyprus’ prospects, debt managers told Reuters.
Several other euro zone countries have sold super long-dated debt in recent years and the average maturity of government bonds in the bloc is now at the highest level on record at nearly 7.4 years.
“It is a demonstration of the backdrop we are in at the moment and it also shows how far Cyprus has come from the crisis days,” said one of the bankers managing the sale.
Cyprus’ 10-year bond yield fell almost six basis points on the day to 1.51% in the wake of the strong demand for the new bond deals. It had touched a one-month high at around 1.61% in early trade.
Similarly, Cyprus’ current longest-dated bond, a 15-year note, hit a three-week high of 2.277% before dropping to 2.18%, lower nearly 8 bps on the day.
Nicosia returned to the bond markets in 2014 and has regained an investment grade credit rating from two of the three main ratings agencies.
A successful 30-year debt issue would reflect as much the broader market environment as Cyprus’ recovery, Commerzbank rates strategist Rainer Guntermann told Reuters.
“This combination of a view that growth will stay relatively sluggish and inflation will be lower, and rates will stay lower almost forever is fuelling this hunt for yield, and investors are taking more risk and duration for pick up,” he said.
