articles | 03 March 2015

10-year bond yield drops to 4.96%

The yield on the Cyprus government 10-year bond, maturing in 2020, dropped below 5% to 4.96%, but still above the four-year low of 4.50% recorded in September 2014.

The yield on the shorter-term 5-year bond issued last year, however was at 5.07%, above the 5% benchmark, “reflecting the investors’ medium-term concerns regarding the Cyprus economic adjustment programme implementation, but also the uncertainty regarding the Greek economy,” the Cyprus News Agency reported.

Compared with the benchmark German 10-year bond the spread on Cyprus paper stood at 416 basis points.

The Cypriot bond yields were pushed up in reaction to the Greek government’s announcement that it would exit from its economic adjustment programme last October and the decision for early general elections. As a result, the Cypriot 10-year bond yield peaked at 5.8% in October 2014, the highest since March 2013, having peaked at 16.4% in June 2012 when the island’s banking sector was on the brink of collapse.

Last year’s downward trend on the yield was not sustained amid concerns over the implementation of the Cypriot programme due to the suspension of the law on foreclosures, the most important prerequisite of the fifth review.

Excluded from the international capital markets since May 2011, Cyprus issued a €750 million 5-year bond last June. The issue was oversubscribed by four times garnering offers of up to €2 billion, but the coupon rate was still high at 4.75% with a 4.85% yield.

Finance Minister Harris Georgiades has stated that the government’s intention is to tap the markers twice in 2015.

Source: Financial Mirror

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