Serbian Bond Yields Drop as Investors Bet on Improved Outlook

Yields on Serbian two-year bonds dropped 0.7 percentage points at an auction as investors expect an improved economic outlook for the Balkan country.

The Debt Management Agency offered investors 10 billion dinars ($117.05 million) worth of two-year bonds and sold 8.72 billion dinars at an average yield of 12.29 percent, it said in an e-mailed statement today. It picked 17 bids out of 19, including seven from so-called custody clients, usually foreign institutional buyers. The two-year bond, with a 10 percent coupon, replaced 24-month T-notes, last sold on Dec. 18 at an average yield of 12.99 percent.

The two-year and three-year bonds “are attractive” given “the yields and the stronger fundamentals” as well as “the shape of the curve and the relative improvement in liquidity we expect to see in the coming months,” Societe Generale analyst Guillaume Salomon wrote in a note to clients today.

Serbia, rated BB- by Fitch and Standard & Poor’s, three levels below investment grade, with a negative outlook, expects yields on its debt to keep falling in 2013 as the government’s fiscal consolidation plan improves public finances.

Serbia plans to sell 110 billion dinars worth of dinar-denominated Treasury bills and bonds and 130 million euros ($170.5 million) in euro-denominated bonds in the local market through March. It needs to repay a total of 95.2 billion dinars in the first three months of the year.

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