Slovak short term debt pushes further in negative territory

By bne IntelliNews February 15, 2016

Slovakia sold €373mn in 3- and 11-year government bonds at an auction on February 15, above its plan to issue a maximum of €300mn, the finance ministry’s Debt and Liquidity Management Agency (ARDAL) announced in a statement.

The sale saw yields push further into negative territory on the shorter term bonds. Slovakia joined the negative yield club in October, with low borrowing costs driven by the ECB’s quantitative easing programme and low interest rate environment. Prime Minister Robert Fico has recently said the country should take advantage of the negative yields to finance major infrastructure projects. However, the yield on the longer-term bonds spiked.

The agency sold €239mn of a 1.5% coupon bond which matures on November 28, 2018, at an average yield of -0.1168%. At the previous auction on January 18 the average yield came in at -0.1089%. The minimum yield of the accepted bids was -0.1959%; the maximum -0.0801%. The issue attracted bids worth €297mn. Foreign investors placed bids worth €194mn, of which €159mn were approved.

ARDAL also sold €134mn of a 1.375% coupon bond that matures on January 21, 2027. The average interest rate came in at 0.8367%, significantly above the 0.4643% seen at the previous auction on April 20.

The minimum yield of accepted bids was 0.7761%; the maximum 0.8700%. The issue attracted bids worth €169mn. Foreign investors placed bids worth €90mn, of which €79mn were approved.

On the local market, Slovakia plans gross issuance of €5.8bn in 2016, including government bonds, T-bills and government loans. It also intends to open two new bond lines. The country issued €3.2bn in new debt in 2015.

In January, Slovakia sold €1bn of a 15-year bond. The paper bears a 1.625% coupon and matures in January 2031. Compared to the previous issue of 15-year bonds in January 2014, the yield was 2pp lower, the finance ministry said. 

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