Lithuania would see strong demand if it sold international bonds because the Baltic nation’s new government has shown it intends to maintain fiscal discipline, Royal Bank of Scotland Plc said.
Lithuania may offer about $500 million of bonds in an as yet undetermined currency to help repay an estimated $2.5 billion of debt that expires this year, according to Mohammed Kazmi, emerging-markets strategist at RBS in London. Giedrius Sniukas, a spokesman at the Finance Ministry in the capital, Vilnius, declined to comment.
“Key risks of political uncertainty and significant fiscal loosening have receded recently in Lithuania, which we think will result in strong demand for the new bond,” Kazmi said today in an e-mailed note. Policies including freezing public-sector wages for a fifth year highlight “the country’s ongoing commitment to fiscal consolidation.”
The four-party coalition government that took office in Lithuania last month has championed a 2013 budget targeting a deficit of 2.5 percent of economic, compared with about 3 percent in 2012. The government last tapped international investors Sept. 19, when it sold 175 million Swiss francs ($191 million) of debt due 2017 with a 2 percent coupon.
The yield on Lithuania’s dollar bond due 2022, which ended last year at a record-low 3.073 percent, was 3.398 percent at 11:19 a.m. today in Vilnius.
There’s a risk of some fiscal loosening in Lithuania in 2014, according to Kazmi.