Slovenia’s Benchmark Bond Yield Rises on Europe, Domestic Woes

Slovenia’s benchmark bond yield rose above 6 percent for the first time since February as the debt crisis in Europe deepens and its largest bank needs more cash than previously announced.

The bond maturing in 2021 extended losses for the second day, with the yield reaching 6.0155 percent at 12:15 p.m. in Ljubljana today, according to mid-pricing data compiled by Bloomberg. The yield dropped below 6 percent in February after the European Central Bank offered lenders in Europe cheap loans.

“It looks like the rise in bond yields is due to both international and domestic factors,” said William Jackson, an emerging-markets economist at Capital Economics in London. “There is general investor risk aversion due to events in the euro zone and it seems the Slovenian authorities have revised up the recapitalization requirement for Nova Ljubljanska Banka d.d., which has probably put the spotlight on domestic problems as well.”

Slovenian banks, including Nova Ljubljanska Banka, are relying on financing from the ECB as record losses and uncertainty in the European banking industry limits access to wholesale funding.

Lenders took out 2 billion euros ($2.53 billion) of ECB loans, the Slovenian central bank said June 14, while NLB borrowed 1.2 billion euros, according to its acting Chief Executive Officer Bozo Jasovic.

The debt crisis in Europe is deepening as the second vote in Greece failed to improve investors’ risk appetite and borrowing costs in Spain and Italy continued to climb.

Nova Ljubljanska, in which the government holds an indirect majority, needs 500 million euros to lift its core Tier 1 capital ratio to above 9 percent, Finance Minister Janez Sustersic said June 15. Previously, the Ljubljana-based lender sought 400 million euros.

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net