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The state has issued $ 1.2 billion in bonds on the most favorable terms yet.
On Monday, the Republic of Serbia borrowed $ 1.2 billion by issuing ten-year Eurobonds on the international market with a yield of 2.35 percent and an interest rate of 2.125 percent.
Photo: BETAPHOTO / MILOS MISKOVThis is the lowest interest rate for dollar bonds, but the last time we issued was in 2013, $ 1.5 billion with an interest rate of 4.875 percent and a yield of 5.15 percent.
This bond expired earlier this year.
Since then, things have changed and the international market has been flooded with money, especially dollars, due to the incessant printing of money to mitigate the effect of the pandemic on the economy.
These funds, as indicated in the announcement of the Ministry of Finance, will be used for the early amortization of 900 million dollars of debt from a total of 1,600 million remaining dollars of ten-year bonds issued in 2011 and maturing in September of 2021.
These bonds bear an interest rate of 7.5 percent.
The state has already obtained non-binding offers on the London Stock Exchange for early repayment, for which it will pay a premium of 5.7 percent, that is, for $ 900 million of debt, it will pay about $ 950 million plus the corresponding interest accrued by the bonds.
For example, in June last year, when $ 400 million of this issuance was bought prematurely, the state had to pay a 9.75 percent premium to investors.
Together with the issuance of these dollar bonds, the state “hedged” the exchange risk, that is, it entered into a so-called swap agreement with investors, in which it actually exchanged dollar liabilities for euro liabilities.
According to the statement, after this transaction, the state will pay an annual interest rate of 1,066 percent on 1,016 million euros.
This is much lower than the May issue of 7-year Eurobonds, which yielded 3.375 percent, and even the 10-year issue of June last year, that is, before the crisis and pandemic. , which we pay 1.6 percent annually.
This also raises some questions, such as why we do not immediately borrow in euros and how much this currency risk insurance costs.
Djordje Djukic, a professor at the Belgrade Faculty of Economics, explains that the currency exchange stop is a standard contract in which the parties are obliged to pay each other funds in a certain currency and carries a fixed fee.
“The price probably includes the information that the head of the US Treasury will be Janet Yellen, who was the head of the Fed, and that the United States will follow an expansionary monetary policy. The dollar is falling against the euro and that will probably also be On the subject, the 1.066 percent long-term interest rate is not small under current conditions, when the ECB is sure to keep the interest rate at zero for the next two years. “Also, the question is why the state does not borrow in euros, because the economy is based on euros in large companies, “says Djukic.
The United States injected $ 2 billion into the system from April to June, so according to Dejan Soskic, a professor at the Belgrade College of Economics, interest rates on dollars fell for everyone, including us.
Although it seems that we have borrowed very cheaply, the return we pay on the debt is still higher than what the EU members pay, even those who are in a worse economic situation than us.
For example, the yield on 10-year euro bonds for Croatia is 0.75 percent and for Greece 0.66 percent. Even investors pay Slovakia to buy bonds because the yield is less than 0.4 percent.
Western European countries mostly have negative bond yields. Yesterday, China also issued negative-yielding euro bonds for the first time.
It is interesting that a few days ago Peru borrowed four billion dollars, of which one billion for 100 years. In the next century, they will pay 3.23 percent per year of that debt.
Demand is almost six times greater than supply
The Governor of the National Bank of Serbia, Jorgovanka Tabaković, said yesterday that with the latest bond issue, Serbia “achieved the best conditions that the State has achieved for financing in dollars.”
“The demand for Serbian bonds was more than five times greater than the supply. It amounted to six billion, and more than 200 well-known investors from around the world showed interest in investing in Serbia,” Tabaković said.
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