Slovenian bonds slid, sending yields to a one-month high, after Prime Minister Alenka Bratusek was ousted as party leader and the European Union said the country must take steps to make its economy more competitive.
The yield on government debt due September 2024 jumped 17 basis points to 3.8 percent, the strongest since March 25 on a closing basis, as of 5:24 p.m. in the capital, Ljubljana. That’s the second-highest rate among 14 euro area peers after Greece, data compiled by Bloomberg show.
Bratusek, who has said she can’t remain at the government’s helm without the support of her faction, was unseated as chairman of the Positive Slovenia party on April 26 by Ljubljana Mayor Zoran Jankovic. With splits widening in her 13-month-old government, Bratusek is fending off attempts by coalition partners and members of her own party to water down pledges on selling state assets as she strives to cut the budget shortfall.
“The possibility of early elections is not welcomed by the market because it will lead to a period of political uncertainty,” Carlos Ortiz, an economist at UniCredit Bank AG, said by phone from London. “Investors are concerned about what’s going to happen with the budget reforms that are planned and whether it will further delay the privatization process.”
Bonds extended declines after European Commission Spokesman Simon O’Connor said a lot needs to be done “in terms of fiscal consolidation and structural reforms to boost competitiveness and job creation in Slovenia.” The bloc is following developments in the nation “very closely,” he said in Brussels today.
Slovenia’s third prime minister since 2011 will meet President Borut Pahor tomorrow, her spokesman said by text message on April 27, raising speculation she will step down. Fitch Ratings will review its BBB+ credit rating, the third-lowest investment grade, for Slovenia on May 2 following Bratusek’s ouster, the ratings company said today.
Bratusek, who has sought to avert an international bailout for the country, is credited with spending 3.2 billion euros ($4.4 billion) to rescue the banking industry. She has also pushed for austerity and asset-sale programs, boosting investor confidence. The yield on the country’s 10-year bonds dropped to a record low of 3.41 percent on April 7, compared with a 2013 high of 6.88 percent.
“Slovenian bonds have performed well, so now that there’s a cloud on the horizon because of political volatility, investors are locking in profits,” Michael Ganske, the head of emerging markets at Rogge Global Partners Plc, said by phone from London.
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