Lithuania to Double Domestic Debt Share of 2013 Funding

Lithuania plans to double the proportion of its borrowing from domestic debt and may stay out of the international market for the rest of this year, Finance Minister Rimantas Sadzius said.

The government will look to local investors for 75 percent of the 7 billion litai ($2.7 billion) of issuance planned for this year, Sadzius said in an interview in the capital Vilnius on Feb. 8. The domestic market accounted for just 37 percent of the 11 billion litai raised by Lithuania last year.

Lithuania sold 400 million euros ($535 million) of 2018 bonds in euros at a yield of 2.631 percent on Jan. 28. Analysts had been expecting a further $1 billion or more of foreign bonds this year, according to Royal Bank of Scotland Group Plc’s Mohammed Kazmi.

“The minister’s comments are a little surprising, given that Lithuania faces external interest and principal repayments of close to $2 billion this year,” Kazmi, an emerging-markets strategist in London, said by e-mail today. “The reduced supply will likely be positive for Lithuanian foreign bonds.”

The yield on Lithuania’s 2018 euro bond rose less than one basis point, or 0.01 percentage point, to 2.69 percent, as of 11:50 a.m. in Vilnius.

“Our strategy has shifted toward the internal market, where we see huge possibilities,” said Sadzius, who took office in December.

Market Surprise

Lithuania plans to use some of the money it borrows at home for projects including housing, which Sadzius said would generate jobs and business.

Lenders in Lithuania have cash to invest as companies and households reduced their debts and increased savings after the global economic turmoil that began in 2008, according to the minister. The government wants to take advantage of that “large amount of cheap credit resources,” he said.

The government today sold 35 million litai of 2016 bonds at an average yield of 2.035 percent through an auction on the Nasdaq OMX Vilnius exchange today.

Lithuania is due to repay 1 billion euros of bonds on March 5 that it first issued in 2003, according to data compiled by Bloomberg.

“If everything goes as planned, perhaps we will have no further need to go to international financial markets this year, unless perhaps we decide to shift borrowing that’s planned for the first quarter of 2014 forward to the last quarter of this year,” Sadzius said.

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