Slovakia is planning to sell its first yen-denominated bonds in more than a decade in 2013 to spread out financing sources as the sovereign-debt crisis continues to hurt the euro area, a government official said.
The euro-region member since 2009 may want to raise the equivalent of about 400 million euros ($511 million) in the sale of Samurai bonds, Deputy Finance Minister Vazil Hudak said. The sale will probably take place in May, after the end of the fiscal year in Japan, he said. The yield on the benchmark 4 percent 2020 euro-denominated note fell to 2.349 percent yesterday from 5.458 percent at the start of this year.
“The strategy is to diversify our sources of funding,” Hudak said in interview in Bratislava, Slovakia, yesterday. “We discussed a potential issue in Tokyo last month and the response was good. So we will try a Samurai bond.”
The country, rated with the sixth-best investment grade at Moody’s Investors Service and Standard and Poor’s, is counting on investors being confident it can meet the European Union’s budget-deficit targets for next year. The government on Nov. 7 raised 1.25 billion euros in 12-year notes, the longest maturity ever for an international bond by the country.
Slovakia is joining Poland, which has yet to set a target date for euro adoption, in tapping the yen market. EU’s largest eastern economy on Nov. 2 sold 66 billion yen ($813 million) in five- and 15-year securities, twice the amount planned.
The Slovak economy is set to advance 2.6 percent this year, the fastest pace in the euro region, and 2 percent in 2013, the second-fastest after Estonia, the European Commission estimates. The growing economy makes it easier for the administration of Prime Minister Robert Fico to cut the budget deficit to the required 3 percent of gross domestic product next year from a targeted 4.6 percent in 2012.
The 12-year benchmark, which was priced at 150 basis points, or 1.5 percentage-point, above the mid-swap rate, helped the Finance Ministry build a cash buffer of about 4.8 billion euros to cover debt maturing early next year, Hudak said.
The country’s borrowing needs for next year are about 9 billion euros, he said. The number compares with 5.7 billion euros in Slovak debt securities maturing in 2013, including 3.1 billion euros due in the first quarter, according to data compiled by Bloomberg.
In addition to domestic debt auctions, the country, which is rated A2 by Moody’s and A by S&P, plans “several” syndicated sales, Hudak said without elaborating. The yen bond would represent the first borrowing in the Japanese currency since 1998, when Slovakia raised 15 billion yen for three years.
The newly adopted constitutional law, which calls for automatic sanctions should debt exceed 53 percent of GDP, is limiting the government’s ability to take advantage of declining yields and borrow more to pre-finance, Hudak said.
Ardal, the state debt-management agency, will probably accelerate bond buybacks to ensure state debt won’t exceed this threshold as of end-2012, Hudak said.
“We don’t plan any significant issuance in the near future,” he said. “We have relatively narrow room for maneuver because of the debt-ceiling legislation.”