Slovakia rewrites history again
Last update: 06.06.2018 08:20
Tomorrow will go down in the history of financial markets as the day when the Slovak Republic, as the first Central and Eastern European country, issued a 50-year bond. Overall, we are the sixth European country which offers such a long-term security in its portfolio. Investors’ interest was tremendous, owing to which Slovakia borrowed 500 million euros for 50 years in the markets under favourable conditions.
The Slovak Republic experienced a ground-breaking accomplishment in financial markets, introducing the first 50-year bond in its history to the market. It is the longest bond the Slovak Republic has ever offered to investors. The conditions under which it managed to place it on the market were particularly attractive. Following the adverse development in previous weeks, formation of the new Italian government gave a positive mood to the markets.
The overall demand of investors for the 50-year bond stood at 1.6 billion euros and Slovakia has ultimately borrowed 500 million euros with a yield to maturity of 2.254 percent. It is less than the average interest rate of the Slovak debt portfolio.
“If someone from abroad extends a loan to a country for ten, twenty, thirty or fifty years with a 2.25 percent interest, he first and foremost trusts such a country, trusting to get his money back in fifty years. It is an honour for us and a real test of the quality of public finances and of the credibility, which is very important when managing public finances,” Peter Kažimír, Deputy Prime Minister and Finance Minister, said.
Across Europe, there are only 5 countries, besides Slovakia, which have such a long security in their portfolios. Italy, Belgium, Spain, France and Ireland issued 50-year securities in 2016. The only country to offer a longer maturity in the form of a 100-year bond was Austria. From among the Central and Easter European countries, Slovakia is the very first country to have a security with such a long maturity. This is in particular owing to our membership in the Eurozone, as well as to our responsible fiscal policy. Slovak government bond yields are completely immune to the contagion of the Italian market, maintaining their fixed surcharge towards core countries, such as Germany and Austria.
“This issue is ground-breaking not only for Slovakia, but it will serve as a certain benchmark across Europe. Only very few countries attempted a 50-year transaction, so this issue resonates not only in our region, but also across Europe,” Daniel Bytčánek, Director of the Debt and Liquidity Management Agency.
In particular, investors from Austria and Germany – a total of 42 percent, United Kingdom with 19 percent, Italy and Spain with 19 percent, Benelux with 13 percent, Nordic countries with 6 percent and CEE countries with 6 percent, were interested in the 50-year bonds. They mostly included management companies – 56 percent, followed by insurance companies and pension funds with 22 percent and banks accounted for 13 percent.
Together with the 50-year bond, a bond with a standard 10-year maturity was offered to investors. With a yield to maturity of 1.021 percent, one billion euros was sold. The attractive price was achieved owing to the huge interest of more than 150 investors, with the overall demand amounting to 3.4 billion euros. The 10-year issue has the lowest surcharge ever issued by the Slovak Republic. Investor composition was well-diversified in geographical terms as well as in terms of investor types.
Ministry of Finance of the Slovak Republic