CEE monthly bond wrap: summer doldrums

CEE monthly bond wrap: summer doldrums
Bond markets are at a stand still in the CIS and ticking over in CESE
By Ben Aris in Berlin July 5, 2018

Bond markets in emerging Europe came to a virtual standstill in June as politics killed off almost all interest in issuing fresh paper: Turkey was holding crucial presidential elections where the outcome was far from clear (Turkish President Recep Tayyip Erdogan won), and Russia has been knocked off its feet by the April 6 round of US sanctions.

A total of six new bonds were issued in Central and Southeast Europe (CESE) worth a total of $3.29bn, which is down on the $4.3bn that was issued the same month a year ago. And YTD CESE has issued a total of $25.3bn over the first six months of last year, which is also down on the $33.3bn that was issued over the same period last year. 

There were no bond issues at all from the Commonwealth of Independent States (CIS) other than two tiny bonds from Russia worth a total of $180mn. That represents a total collapse of interest in bond issues compared to the $7.2bn issued in the CIS in the same month a year ago, including $5.9bn from Russia, according to the information provided by CBonds. Year to date Russia has issued a total of $9.5bn worth of bonds, which is a third of the $18.2bn that was issued by this time last year. 

The market was already well down y/y in May as bne reported last month, thanks to the US sanctions and the looming elections took their toll, but even in May the CIS still managed to issue a total of $540mn of bonds, while the CESE region issued about the same amount as this month.

Amongst the CESE issues were two sovereign deals: Romania issued $1.2bn that matures in 2048 at 5.125% and Croatia issued €750mn that matures in 2028 at 2.7%.

With a public debt to GDP ratio of only 35.7% Romania has plenty of room to issue more debt and plans another Eurobond this autumn, according to unofficial information circulated in May.

The country’s external debt service this year is RON15.3bn (€3.32bn, principal only) according to the Treasury and the country usually finances some 50% of the budget deficit from external market as well.

Considering the 3% of GDP, or €6bn, target budget deficit, the US dollar bond accounted for a small fraction of the financing needed in the year. On top of the €2bn Eurobonds issued in February, the country has now met roughly half of the borrowing plans for the full year.

Croatia is also enjoying a strong credit profile and both Fitch and Standard & Poors have raised Croatia’s ratings this year. That is reflected in the steep fall in the yields on its bonds and most of the proceeds from this issue will be used to refinance existing Eurobonds maturing in July this year, amounting to €750mn with a coupon rate of 5.875%, saving the budget some HRK179mn per year in debt servicing costs.

The government of Bosnia & Herzegovina’s Serb entity, Republika Srpska, also turned to the international markets with its debut Eurobond issue but only managed to sell €168mn of the €200mn issue. The bond was launched a few months ahead of Bosnia’s October elections, which are expected to see a spike in nationalist rhetoric, not least from Republika Srpska’s bellicose President Milorad Dodik, and a worsening of the already volatile political situation. Analysts have also warned that Republika Srpska’s debt is mounting and could cause serious troubles in the next few years, while there have also been reports in local media that the entity having difficulty paying benefits and public sector wages.

There was one significant corporate issue too: the state-owned Bulgarian Energy Holding (BEH) issued a €400mn bond that matures in 2025 at 3.5%.

The company describes itself as, “the holding company for a group of companies which are principally engaged in electricity generation, supply and transmission, natural gas transmission, supply and storage and coal mining. BEH Group holds a leading position in the electricity and gas market in Bulgaria and, through electricity exports, in the Balkans. BEH is wholly owned by the Bulgarian state and is the largest state-owned company in terms of total assets in the country. The rights of ownership of the state are exercised by the Minister of Energy.”

The bond was the third issue BEH has placed and the lowest interest rate yet since the company started participating in the international financial markets. At the same time, the seven-year maturity is the longest attained so far, BEH said in a statement. The company’s other five-year issue due in 2021 carries a fixed annual coupon of 4.875%.

CEE - Top issues in June 2018




Volume (m.)

Lead Managers

Bulgarian Energy Holding, 3.5% 28jun2025, EUR




Croatia, 2.7% 15jun2028, EUR



Deutsche Bank, JP Morgan, UniCredit

Romania, 5.125% 15jun2048, USD


1 200

Citi, Deutsche Bank, HSBC, JP Morgan, UniCredit