Jun 13, 2014

Cyprus is back in the money markets

Cyprus is back in the money markets

  • Cyprus is back in the money markets
  • Raises €750M with first post-crisis bond

Cyprus has issued a new five-year bond just over a year after the country was hit by a financial crisis, in the latest sign of returning investor confidence in the Eurozone’s southern periphery.

The €750M bond, which matures in June 2019, was priced at a yield of 4.85%, lower than expected, and it was substantially oversubscribed (demand exceeded the €2B). Fund managers accounted for about half of subscriptions, with 22% coming from banks and private banks and 27% from hedge funds, according to bankers working on the deal.

According to the head of capital markets for Greece and Cyprus at Deutsche Bank, Mr Exarchos, stated that this is definitely a vote for confidence for peripheral Europe.  Investors are hoping that the European periphery – be it Cyprus or Greece – will converge closer and come back into sync with the rest of Europe.”

The issuance comes as the Cypriot economy shows signs of improving. Standard & Poor’s upgraded the country’s credit rating to B after its economy contracted by 5.4% last year – less than the IMF had expected.

Mr Exarchos said the deal augurs well for private sector growth in Cyprus.  “There is now an opportunity for financials and corporates to follow,” he said. “Cyprus households, small and medium-sized enterprises and financials have been deprived of liquidity and this now looks set to change.”

The ECB this month loosened its monetary policy – cutting interest rates and introducing a charge on overnight deposits – which drove down bond yields across the Eurozone.

“The ECB announcements boosted the peripheral markets specifically – and as a consequence it positively affected this deal,” said Hampus Falth, a debt syndicate manager at UBS, pointing out that the recently issued Greek five-year benchmark rallied in response to the new measures.

“We’ve had a few breakthroughs this year, and now with Cyprus I would like to say we can put the Eurozone crisis behind us,” he added.

Deutsche Bank, Goldman Sachs, HSBC, UBS and VTB Capital were hired to work on the issuance.

Meanwhile, the Cyprus News Agency announced today that the new 5-year bond amounting to € 0,75B issued last Thursday by the Ministry of Finance is showing a downturn.

According to data processed by the Cyprus News Agency (CNA), the performance of the new 5 year bond maturing in 2019 is declining to 4.78%. According to analysts, the fact that the yield is lower than the yield of 4.85% which was announced on June 18, demonstrates the increased interest of investors for the new Cypriot bond.

The other Cypriot bonds, like the 10-year bond ending 2020, show an upward trend since June 16, when the 10-year yield fell to 4.68%, which was the lowest point in the last three years.Analysts attribute this trend to the turmoil of the activity of ISIS jihadist movement in Iraq, but also to the fact that investors maintain a connection of the economy with Greece.

Sources:  Financial Times (extracts) and Cyprus News Agency



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