Slovenian Bond Yield Drops to Record as Moody’s Raises From Junk

Slovenia’s bonds rallied, sending the yield on the benchmark securities to a record low, after Moody’s Investors Service upgraded the country’s credit rating to investment grade.

The yield on the euro-denominated government notes maturing in 2024 dropped 6 basis points to 1.385 percent at 11:01 a.m. in Ljubljana, according to data compiled by Bloomberg. That compares with 7.5 percent in March 2013, before the government rescued its mostly state-owned banks without resorting to an international bailout.

Moody’s upgraded Slovenia’s rating to Baa3, the lowest level in the investment category and on a par with Turkey and Romania, from Ba1, on Jan. 23. The rating company, which assigned a stable outlook, cited the stabilization of the banking industry, fiscal consolidation efforts by the government of Prime Minister Miro Cerar and the likelihood it will continue the overhaul of the economy.

“Moody’s corrected a mistake as it underrated Slovenia in times of crisis,” Lutz Roehmeyer, a money manager at Landesbank Berlin Investment GmbH, who helps oversee $1.1 billion of emerging markets debt, said by phone on Monday. “With the other rating companies on much better rating levels, Moody’s was the outlier and took much too long to realize that Slovenia is an investment-grade country in the end.”

ECB Plan

Standard & Poor’s rates the country A-, the fourth lowest grade in the investment category with a stable outlook, while Fitch Ratings has a BBB+ score.

Slovenia, which last year raised a record $5.75 billion in government debt, said earlier this month that it won’t need to borrow in international markets in 2015 to finance the budget. The Finance Ministry may still tap debt markets to raise money for debt maturing next year or in 2017.

Yields have fallen across the euro area since the European Central Bank announced its unprecedented bond-buying plan last week, spurring investors to get hold of government debt before the purchases begin in March.

The Moody’s rating action, announced in a statement after the end of trading on Friday, combined with the ECB move “is now very supportive for Slovenian debt,” Roehmeyer said.

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