Cyprus yields €1 bln from international markets

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Despite the pandemic, international markets have shown their trust in Cyprus’ economy, as the country generated €1 bln from the sale of a five-year Euro Medium Term Note (EMTN) with the lowest interest rate in its history.

On Tuesday, Cyprus raised €1 bln in a 5-year bond EMTN issuance with the book oversubscribed eight times while the bond’s yield is estimated at 0.05% to 0.06%, just a hairline over the eurozone base rate of 0%.

Despite the fact “final pricing is expected later in the day, we expect (the yield) to range between 0.05% and 0.06% which is the lowest yield ever achieved by the Republic for a 5-year benchmark,” Finance Minister Constantinos Petrides said in a statement.

Petrides said total offers reached €8 bln, which “combined with the indicative yield shows that in this internationally challenging economic situation due to the pandemic, international markets continue to show confidence in the Cypriot economy and its policies.”

He said that the added liquidity will enhance the government efforts to fence off the financial impact of the pandemic.

“The government’s primary concern was and remains, to secure the necessary ammunition that would enable us to support the welfare state and the health system until the economy recovers, while securing fiscal sustainability.”

Markets are still confident in Cyprus bond issuance, and the asset purchase programme underway at the European Central Bank helps to create favourable market conditions.

Funds are earmarked for the refinancing of the debt (T-Bill) that the state borrowed from domestic banks in April 2020, amounting to €1.25 bln.

The government had instructed investment banks Barclays, BNP Paribas, JP Morgan, Morgan Stanley and Société Générale to lead the issue.

The last time the government turned to the international markets for cash was in April 2020, raising €1.75 bln with two benchmark-sized Euro Medium Term Notes.

The €1.25 bln 7-year EMTN was priced at a spread of 165 basis points over the mid-swap rate and the €0.5 bln 30-year EMTN was priced at a spread of 215 basis points over the mid-swap.

Cyprus has borrowed nearly €5 bln in efforts to weather the COVID emergency that has battered its economy.