Both Croatia and Montenegro tapped international markets with new bond issues this week, reporting high levels of interest from investors. 

Croatia's finance ministry said on March 6 it has successfully issued a 10-year Eurobond with a nominal value of €1.5bn on the international market with demand from investors exceeding €8.5bn.

The annual coupon was set at 3.375%, with an achieved yield to maturity of 3.421%, the finance ministry said in a statement on its website. The Eurobond will mature in 2034.

"The strong demand and the achieved final conditions of the issue are a strong confirmation of Croatia’s credibility as issuer on the international market, and of investors’ trust in the Croatian economy and public finances, especially after the entry in the eurozone and Schengen," the ministry said.

Croatia picked Deutsche Bank, J.P. Morgan, Morgan Stanley and UniCredit’s Croatian unit Zagrebacka Banka as agents for the issue.

The finance ministry said that the subscription for the bond was held the previous day and 180 investors from areas including Austria, Benelux, Central and Eastern Europe, Denmark, Germany, Switzerland and the UK showed interest in the issue.

Montenegro makes US dollar debut 

Also on March 6, Montenegro’s Finance Minister Novica Vukovic said the government raised $750mn from its first US dollar bond issue, above its initial plan for up to $700mn amid significant interest from investors. The demand totalled $4.6bn.

The seven-year bond will cover Podgorica’s previous bonds that mature in 2024 and 2025.

“We do not borrow for spending on administration but because of earlier debt that must be repaid regularly,” Vukovic said.

He was referring to accusations by the opposition that the government of Prime Minister Milojko Spajic is increasing the country’s debt to finance higher wages and pensions.

In 2024, Montenegro has to repay debt worth €656.7mn.

Vukovic added that the budget law for 2024 allows the government to borrow up to €1.15bn this year.

The finance minister noted that the country’s first US dollar bond has attracted new investors and will save to the country around €35mn as a hedging in euro was agreed.

The yield was 5.88%, below the 6.5% yield on secondary market of existing bonds. At the same time, thanks to the hedging arrangement, Montenegro will repay the bond in euros.

Earlier in March, Gojko Maksimovic, head of the financial markets division of Hipotekarna Banka, leaked information about the planned bond, saying that Montenegro intended to sell between $500mn and $700mn depending on investors’ demand.

Montenegro targeted a yield of 7.5%, according to Maksimovic.