Yields on Serbia’s dinar debt will probably drop after the government sold a new Eurobond last week.
Prime Minister Ivica Dacic’s Cabinet will offer investors 20 billion dinars ($240 million) of three-year bonds on Feb. 19 in a first domestic debt sale after raising $1.5 billion via a benchmark 7-year Eurobond on Feb. 14.
“This Eurobond will push for the further rapid decline in yields on the locally issued debt,” researchers at the Belgrade-based Raiffeisenbank AD, including Ljiljana Grubic, said in a note to clients today. The trend may be interrupted if there are early parliamentary elections, they said.
Dacic’s coalition has tapped foreign markets three times since taking office on July 27, taking advantage of lower borrowing costs to raise cash for the budget before returning to aid talks with the International Monetary Fund.
Serbia has borrowed a total of $3.25 billion since September, equivalent to 8 percent of its gross domestic product, as the government tries to “ensure financial stability in 2013,” the Finance Ministry said in a statement on Feb. 14, adding that “part of the raised funds will be used to repay early some expensive credits” from the past.
The government last auctioned three-year dinar-denominated bonds with a 10 percent coupon on Dec. 4, selling 42 percent of the offered amount at an average yield of 13.95 percent.
The newest Eurobond makes the Finance Ministry’s “seat more comfortable, which may also push non-residents’ flows into local debt in the anticipation of even lower dinar yields ahead,” analysts at Zagreb-based Hypo Alpe-Adria-Bank DD, including Hrvoje Stojic, said in a note to investors.
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