Croatia raises 364-day bills offer as yields stay at historical lows

Croatia raises 364-day bills offer as yields stay at historical lows
By bne IntelliNews May 24, 2017

Croatia sold HRK400mn (€54mn) worth of kuna-denominated and €20mn worth of euro-denominated 364-day bills at an auction on May 23, according to a statement from the finance ministry.

The finance ministry’s kuna bills offer was higher than the planned HRK350mn thanks to strong demand of HRK682mn as yields remained flat at a historic low of 0.45% for the sixth consecutive auction.

The ministry also doubled its euro bills offer compared to the planned €10mn as demand stood strong at €30.1mn. Yield on euro bills stayed flat at the historical low of 0.05% for the second consecutive auction.

Croatia's better than expected macroeconomic performance supported the outlook for the Adriatic country’s borrowing performance in 2017. Improved financing conditions on the domestic financial market were expected to continue. However, the unexpected coalition split last month affected demand at the previous auction held on May 2.

Demand at the May 23 auction seemed to have rebounded after the ruling Croatian Democratic Union (HDZ) achieved a landslide victory in city councils in the first round of local polls on May 21.

At the previous T-bill auction held on May 2, Croatia sold HRK409mn worth of kuna-denominated 364-day bills. The finance ministry’s kuna bills offer was lower than the planned HRK600mn due to weak demand of HRK509mn as yields remained flat at a historic low of 0.45% for the fifth consecutive auction.

So far, Croatia has raised a total of HRK9.77bn through kuna denominated and €20mn via euro denominated T-bills auctions this year.

Following the auctions held on May 23, the Adriatic country’s kuna denominated short-term (less than one-year) debt stock rose to HRK17.59bn while euro denominated short-term debt stock increased to €103.6mn.

The finance ministry will hold the next domestic bills auction on May 30 to raise a total of HRK700mn via 182- and 364-day bills against a debt redemption of HRK680mn.

All three major rating agencies, Moody’sFitch and Standard & Poor's, rate Croatia at two notches below investment grade with stable outlooks.

Croatia raised HRK3bn with a cost of 2.25% via five-year bonds and another HRK5.5bn with a cost of 2.875% via 10-year domestic bonds in early February to refinance a maturing HRK5.5bn 10-year bond. Last month, the Croatian finance ministry also sold €1.25bn worth of 10-year Eurobonds with an actual yield of 3.20% and a coupon rate of 3%.

Croatia raised a total of HRK8.5bn via five-year and 10-year domestic bonds in early February to refinance a maturing HRK5.5bn 10-year bond. The Croatian finance ministry also sold €1.25bn worth of 10-year Eurobonds with an actual yield of 3.20% and a coupon rate of 3%.

In 2016, the ministry sold a combined HRK16.9bn worth of kuna T-bills and €1.62bn worth of euro-denominated securities on the domestic market. Croatia needed HRK27bn in 2016 just to refinance maturing bonds and cover the budget deficit, excluding the treasury bills. In 2017, it will need HRK30bn to refinance bonds and pay accrued interest.

Croatian Finance Ministry's T-bill Auctions
  91-day (HRK thousand)     182-day (HRK thousand)     364-day (HRK thousand)     91-day (EUR thousand)     364-day (EUR,000)     455-day (EUR,000)    
  Issue Bids Yield Issue Bids Yield Issue Bids Yield Issue Bids Yield Issue Bids Yield Issue Bids Yield
05/01/16             1,580,000 2,130,000 1.46%                  
26/01/16             668,000 1,641,000 1.35%       2,000 2,000 0.40%      
02/02/16             626,000 2,012,000 1.25%                  
23/02/16 10,000 10,000 0.40% 5,000 5,000 0.50% 1,273,000 2,118,000 1.13% 11,000 12,500 0.20% 3,000 4,800 0.30%      
01/03/16 5,000 5,000 0.40% 20,000 20,000 0.50% 1,500,000 2,100,000 0.99%                  
08/03/16       1,000 6,000 0.45% 778,000 778,000 0.99%                  
15/03/16             352,000 402,000 0.99%                  
29/03/16             581,000 581,000 0.99%                  
26/04/16             672,000 672,000 0.97%                  
03/05/16             575,000 575,000 0.97%                  
24/05/16             320,000 320,000 0.95%       16,000 21,000 0.25%      
31/05/16             683,000 693,000 0.95%                  
07/06/16             402,000 402,000 0.95%                  
28/06/16             562,000 622,000 0.94%                  
09/08/16                               1,500,000 1,647,226 0.51%
23/08/16             1,151,000 1,551,000 0.91%                  
30/08/16             406,000 931,000 0.87%       20,100 22,100 0.24%      
25/10/16             1,200,000 2,492,000 0.80%       29,000 47,700 0.17%      
22/11/16       10,000 10,000 0.30% 1,700,000 2,562,000 0.70%       3,000 10,000 0.10%      
29/11/16             700,000 1,268,000 0.70%       31,500 43,000 0.05%      
06/12/16             1,068,000 1,398,000 0.65%                  
2016 Total 15,000 15,000 - 36,000 41,000 - 16,797,000 25,248,000 - 11,000 12,500 - 104,600 150,600 - 1,500,000 1,647,226 -
03/01/17 50,000 250,000 0.20% 50,000 50,000 0.28% 1,535,000 1,635,000 0.64%                  
24/01/17             928,000 1,128,000 0.60%                  
31/01/17             800,000 980,000 0.59%                  
21/02/17             1,496,000 1,931,000 0.50%                  
28/02/17             1,500,000 2,697,000 0.50%                  
07/03/17             864,000 1,064,000 0.45%                  
14/03/17             300,000 460,000 0.45%                  
28/03/17             558,000 658,000 0.45%                  
25/04/17             876,000 976,000 0.45%                  
02/05/17             409,000 509,000 0.45%                  
23/05/17             400,000 682,000 0.45%       20,000 30,100 0.05%      
2017 Total 50,000 250,000 - 50,000 50,000 - 9,666,000 12,720,000 - 0 0 - 20,000 30,100 - 0 0 -
Source: Ministry of Finance

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