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The Ministry of Finance announced that today, after a seven-year hiatus, Serbia successfully returned to the dollar stock market due to the anticipated redemption of 2011 U.S. dollar bonds with a 7.5 percent rate of return and a coupon rate of 7.25 percent.
Following the presentation of the macroeconomic results achieved by Serbia to the international investing public, as the country with the least economic decline in Europe this year, as well as the highest growth expected in the next, today it has begun to collect offers for a new issue of bonds worth 1.2 billion dollars. it’s in the statement.
Finance Minister Sinisa Mali said that the demand of more than six billion dollars was made, which is five times more than the offered value of the issue, which was expressed by 200 respectable funds, insurance companies and banks, mainly American and British.
“All this shows the great confidence of investors in the reforms implemented by the Government of the Republic of Serbia in the field of economy and public finances,” said Siniša Mali.
The new ten-year bonds were issued for an amount of 1,200 million dollars with a yield of 2.35 percent, a coupon rate of 2.125 percent and a final interest rate in euros, after carrying out a transaction of coverage, 1,066 percent. The realized rate is seven times lower than the rate on bonds previously issued in 2011, which was also the target of the new issue. The bonds will be listed on the London Stock Exchange.
“We take advantage of the favorable conditions, the best of this year, to enter the international financial market again and replace the most expensive debt with a much cheaper one. In addition, this is the lowest interest rate that our country has received in the debt market. capital, even better than bond issuance. ” since June and November 2019 at a time of significantly more stable market conditions, “said the Finance Minister.
He added that the funds from the new issuance are repaying 900 million dollars of bonds issued in 2011, of the total of 1,600 million dollars that mature in September 2021, the announcement indicates.
“In this way, Serbia managed to repay most of the bonds at the beginning of this year, save on interest payments next year and thus reduce the total need for financing in 2021, so that we can be as strong and ready as possible to next year, “Mali noted.
According to him, guided by the best international practices of active management of public debt, the Ministry of Finance concluded a currency exchange transaction by means of which it converts the liabilities based on the bond issued in euros at a significantly final interest rate. lower.
Serbia will pay its obligations on the basis of the dollar-denominated issue in euros at a coupon rate of 1.066 percent of the nominal value of the issue after conversion of 1.016 million euros, the announcement indicates.
This means that the Ministry of Finance seized the opportunity of a favorable exchange rate of the euro and the dollar at this time, as well as the current divergence between the interest rates of the dollar and the euro in the international capital market and achieved the best price of debt, optimizing the monetary structure of public debt. from the risk of changes in the exchange rate ”, explained the Minister, and as added in the announcement, in this way additional savings of around 11.6 billion dinars were achieved.
As you said, in this way, Serbia is introducing a new hedging practice for the first time, ie. use of financial derivatives in order to hedge exchange rate and interest rate risk, in accordance with internationally recognized ISDA (International Swaps and Derivatives Association) standards, and “therefore, gives a strong boost to the development of the national financial market through active financial risk management “.
“The return to the dollar stock market and a new issue denominated in dollars, allows Serbia to remain present in the emerging markets bond index – EMBI Index, which ensures its visibility in the US capital market, as well as on the map broader international investment “, concluded the minister. Finance.
By early repayment of newly issued dollar bonds, the share of general government debt in GDP remains at the previously projected level, below 60 percent, while at the same time using favorable market conditions to provide additional funds for debt service in the coming year. is added in the declaration.
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