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

Pharmacies run out of flu shots

Association told CNA. As she said, people were in a state of panic to get the flu shot because of the COVID-19 situation and as...

Objections over only one woman on Deputy Ministry of Culture’s advisory group

Only one woman is part of the fledgling 16-member advisory committee on the establishment of a Deputy Ministry of Culture in Cyprus and this...

Britain says London mayor ‘bankrupted’ the capital

Britain is looking to force the body responsible for running London to sell off land and cut running costs as part of a fractious...

Nicosia hosts Cyprus-Greece-Egypt Trilateral Summit

Nicosia on Wednesday is hosting the 8th Cyprus-Greece-Egypt Trilateral Summit with the leaders of the three countries set to discuss several issues of mutual...

Limassolians organise parties in Nicosia to overstep covid measures

Stricter measures imposed on coastal Limassol to contain the coronavirus spread have prompted some of its citizens to organise their parties in Nicosia to...

Taste

Squash soup

Ingredients: 1 kg pumpkin, cut into small cubes, approximately 5 cups 2 medium (400g) sweet potatoes, cut into cubes, approximately 2 ½ cups 1 chopped leek, only...

Mezedes

No visit to Cyprus is complete without enjoying the traditional meal of many small dishes known as ‘meze’. This large feast, which has been a...

Prawns with fried cheese, barley shaped pasta

Put the barley shaped pasta into a small pan with salted water, bring to a boil and when tender, drain. Peal the prawns leaving...

Salmon and shrimp sheftalies

Mix all ingredients for tabbouli in a bowl and keep to one side so flavours can combine. Prepare the sheftalies: wash and soak the casing...