Cyprus raises €1.75 bln, seeks another €1.25 bln

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Cyprus has issued two new benchmark-sized Euro Medium-Term Notes for a total amount of €1.75 bln, adding to the state’s liquidity and capability to support the local economy during the coronavirus crisis.

Nicosia will be looking to draw another €1.25 bln from local banks on next week, by issuing local bonds with a maturity between a few months and three years.

Cyprus’ newest bonds come at a high cost as interest rates on the two EMTNs are higher than previous issues.

The 7-year bond amounting to €1.25 bln, was priced at +165 basis points above the mid reference price -swaps and the 30-year bond, fetching € 500 mln, were priced at +215 basis points above the mid-swaps reference price.

Total bids amounted to €2.6 bln with €1.8 bln for the 7-year period and €800 mln for the 30-year period.

Finance Minister Constantinos Petridis expressed satisfaction with the completion of the issuance of the two bonds.

He said the amount of the total supply shows that in this difficult international economic situation, characterised by great uncertainty due to the economic impact of the pandemic, the Cypriot economy continues to be surrounded by confidence in international markets.

“The government’s primary concern at this time is to ensure the necessary supplies, to follow those prudent policies that will allow us to support the welfare state and health system, the workers and vulnerable groups, at this difficult time for the country, until the economy recovers,” Petrides said.

Currently, as estimated, the state has liquidity of €1.1 bln at its disposal to deal with the crisis and hand out support packages to employees and businesses, while facing what economists fear is the biggest post-1974 crisis.

Cyprus planned to borrow some €2.5 bln in 2020 but saw its financing needs inflating to €5.5 bln.

With Cyprus’ latest bond issues, corresponding to 8% of GDP, public debt returns to levels above 100%, making the economic recovery an even more complex task after the end of the 2013 financial crisis.

The Finance Ministry has already announced that it expects to see the country’s economy shrink by 5-10% of GDP.