Ministry of Finance gives further clarifications and details on recent bonds issue


The recent issue of bonds by the Republic was solely intended to offset the reversal of the fiscal balance and to decisively strengthen the precautionary reserve of the state, because of the uncertainty and consequences of Covid-19 in the Cypriot economy, the Public Debt management Office says in a statement.

According to the announcement of the Republic of Cyprus, the issuance of the 7-year and 30-year European bonds on April 7, took place within the framework of the Annual Financial Program 2020, as recently revised to cover mainly the loss of fiscal revenue due to the economic implications of the pandemic.

It is added that the sole purpose of this bond issuance was to offset the reversal of the fiscal balance, from a fiscal surplus to a fiscal deficit mainly due to the reduction in tax revenues, resulting from the declining course of GDP due to the effects of Covid-19, but also because of the supportive measures in the approved supplementary budget. On the other hand, the bond issue aims to decisively strengthen the precautionary reserve maintained under the Public Debt Management, given the international economic uncertainty and as a result of the unknown duration of the pandemic.  

 Seven-year bond
 The 7-year bond allowed the Republic of Cyprus to raise an amount of 1.25 billion euros from a total of 1.8 billion euros offered. The bond effective date is 16 April 2020 and the maturity date is 16 April 2027. The bond yield was 1.564%. The annual interest rate was set at 1.50%.

Thirty-year bond
  With the 30-year bond, an amount of 0.5 billion euros was raised from a total of 0.8 billion euros offered. Its effective date is April 16, 2020 and its maturity date is April 16, 2050. The bond yield was 2.339%. The annual interest rate was set at 2.25%.

For the above two bonds, more than 240 bids were submitted, with more than 98% of the bidders coming from the international market.

Additionally, the Ministry of Finance clarifies that above bond issues, as well as any new issues, are not related to the recent proposals for the issuance of a bond in order to support the private sector of the economy.

 At this stage, it is added, private sector support could only be sought indirectly through mechanisms that would make it possible to use -with due diligence- the available banking liquidity.

Source: CNA