Croatia considers selling ten-year USD 2bn bond on US market - report

By bne IntelliNews November 7, 2013

Croatian finance minister Slavko Linic is allegedly considering tapping the US market later this month, planning to sell ten-year bond worth USD 2bn, daily Poslovni Dnevnik reported, quoting unofficial information. The report comes after in October Linic dismissed the possibility to sell debt abroad, saying the government will use the domestic market only to finance budget spending by end-2013.

Last time the Croatian government went to the US market to finance its spending in the spring of 2013 it achieved an interest of 5.625%. Back then Croatia sold USD 1.5bn. According to analysts, if the Croatian cabinet decides to borrow from the US again now, the yields will be close to 7% since Croatia and Hungary are seen as high risk destinations in CEE.

This unexpected change of mind might be a result of the recent developments pointing towards Croatia entering into EU’s Excessive Deficit Procedure (EDP). The Adriatic country’s budget deficit for 2012 was recently revised, reaching 5% of GDP (from an earlier estimate of 3.4%/GDP), significantly above the Maastricht criteria threshold of 3%/GDP. Public debt is also an issue at 59.5%/GDP in Q2 2013, just a tad below the 60% limit.

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