Insider Economy Cyprus gets 9 b euro demand for 5- and 30-yr debt

Cyprus gets 9 b euro demand for 5- and 30-yr debt

Cyprus’ first 30-year bond sale was overloaded with orders on Wednesday, with high demand for such long maturities showing just how much Europe’s bond market is adjusting to expectations of persistently low interest rates and central bank stimulus.

The island nation began marketing five-year and 30-year bonds on Wednesday, and already demand has exceeded 9 billion euros, split evenly between the two maturities, bankers said.

The demand for 30-year debt from a country that needed a bailout from the European Union and International Monetary Fund just five years ago is remarkable and says as much about the state of the European economy and bond market as Cyprus’ prospects, debt managers said.

Several other euro zone countries have sold super long-dated debt in recent years and the average maturity of government bonds in the bloc is now at the highest level on record at nearly 7.4 years.

“It is a demonstration of the backdrop we are in at the moment and it also shows how far Cyprus has come from the crisis days,” said one of the bankers managing the sale.

Cyprus’s 10-year bond yield fell almost six basis points on the day to 1.51 percent in the wake of the strong demand for the new bond deals. It had touched a one-month high at around 1.61 percent in early trade.

Similarly, Cyprus’s current longest-dated bond, a 15-year note, hit a three-week high of 2.277 percent before dropping to 2.18 percent, lower nearly 8 bps on the day.

Cyprus’ banking sector ran into trouble during the wider euro zone debt crisis, forcing it to accept aid from the European Union and the International Monetary Fund.

However, the country returned to the bond markets in 2014 and has regained an investment grade credit rating from two of the three main ratings agencies.

A successful 30-year debt issue would reflect as much the broader market environment as Cyprus’ recovery, said Commerzbank rates strategist Rainer Guntermann.

“This combination of a view that growth will stay relatively sluggish and inflation will be lower and rates will stay lower almost forever is fuelling this hunt for yield, and investors are taking more risk and duration for pick up,” he said.

As if to underline these expectations of further central bank easing, data from Australia overnight and Germany on Wednesday pushed yields lower across the board.

Better-rated euro zone bond yields were around 2-4 bps lower on the day after Germany’s Ifo economic research institute showed a further fall in German business morale, attributed by an Ifo economist partly to the Brexit delay.

This after data showed Australian inflation slowed sharply last quarter to the lowest in three years, a disappointingly weak outcome that ticks one of the boxes for an interest rate cut perhaps as soon as May.

“The miss in Australian CPI and German Ifo this morning both point in the direction of central banks having to do more, and this is causing the rally in bonds,” said Mizuho strategist Antoine Bouvet.

Germany’s 10-year government bond yield, the benchmark for the bloc, was closing in on the zero mark, and was 3.5 bps lower at 0.007 percent by midday.

(Reuters)

Top Stories

Trump says protesters would have met ‘vicious dogs’ if White House fence breached

U.S. President Donald Trump on Saturday said demonstrators protesting the death of a black man who died after a white police officer knelt on...

Paphos: Police publish photos of stolen valuables

  Police have found jewellery, watches and other valuables in the possession of a 22 year old and a 15 year old who are under...

Protests flare around the United States over Minneapolis killing

Violent protests flared overnight in several U.S. cities as demonstrators vented their anger over the killing of George Floyd, a black man who died...

Just one new Covid-19 case on Saturday; total at 943

  One person has tested positive for coronavirus from a total of 2061 tests, the Health Ministry said on Saturday, bringing the total since the...

Paphos: 10 hotels to reopen in June

  Ten of the 57 hotels in the Paphos district are expected to reopen in June, the president of the Paphos branch of the Cyprus...

Taste

Local cuisine: An introduction

Rich in fresh ingredients and tasty herbs, offers the very best of Mediterranean culinary delights. Head out to a tavern and feast on a...

Spiced lamb with beetroot salad and scented yoghurt

Lay the lamb on a tray, skin side down. Rub with crushed garlic, sprinkle with spices and ground pistachios, wrap in plastic wrap and...

Easy seafood pasta with white wine sauce

Ingredients: 2-3 tbsp olive oil 1 garlic clove, chopped 2-3 tablespoons of whipped cream 1/3 cup white wine 300g spaghetti, roughly broken 300-400g of...

Traditional salads that will blow your mind away

This traditional salads will make you actually love salads! Cyprus may be famous for souvla and kleftiko but if you try the traditional salads with...