11/05/2011 09:15
The Republic of Cyprus will have to borrow at least two billion euros by early 2012 to refinance its debt.
The Finance Ministry figures show that bonds of €1.9 billion are to expire in the next 10 months, which they must be refinanced either by domestic or foreign creditors.
On top of that, the fiscal deficit is expected to reach €800 million during the period.
In the two previous years, the government had proceeded with a middle-term borrowing from the international markets, in an effort to differentiate the structure of the Cyprus debt, which stands at €10.6 billion.
With three different issues of European middle-term bonds, it absorbed around €3 billion.
However, the prevailing negative conditions in the international markets have changed the Ministry’s plans, which now prefers to borrow on a short-term basis from the domestic market, postponing regularly its plans to turn to foreign markets.
The mood of the foreign creditors has raised concerns to the Ministry, which sees the 10-year bond issued 15 days ago with an interest rate of 4.62% trading close to 6.20%.
The yield entails that the new creditors will ask for a similar interest rate in order to participate in new issues of the island’s debt, since they can buy existing bonds trading in the LSE with relatively high yields.
Being aware of the challenges in the global markets, the Ministry has turned to issues of short-term debt in the domestic market in the past two months.
In the past month, it absorbed €400 million for a year with an interest rate of 2.98-3.15%.
The only borrowing from the European middle-term bonds program was in February 2011, when it borrowed €170 million with a private placement of a euro-bond at 4.75%. The issue was mostly covered by domestic creditors.
Part of the government’s short-term debt – nearly €550 million – expires during summer and nearly €1 billion expires in early 2012.
In the next few weeks, the Ministry is expected to borrow €60 million from the European Investment Bank for 20 years and in June €100 million more.
The Ministry does not exclude, however, to turn to foreign borrowing in the next few months if the conditions in Greece improve.
Although it bets on the improvement of the global conditions, it understands that things might worsen, affecting Cyprus’s terms of borrowing.
The Finance Ministry figures show that bonds of €1.9 billion are to expire in the next 10 months, which they must be refinanced either by domestic or foreign creditors.
On top of that, the fiscal deficit is expected to reach €800 million during the period.
In the two previous years, the government had proceeded with a middle-term borrowing from the international markets, in an effort to differentiate the structure of the Cyprus debt, which stands at €10.6 billion.
With three different issues of European middle-term bonds, it absorbed around €3 billion.
However, the prevailing negative conditions in the international markets have changed the Ministry’s plans, which now prefers to borrow on a short-term basis from the domestic market, postponing regularly its plans to turn to foreign markets.
The mood of the foreign creditors has raised concerns to the Ministry, which sees the 10-year bond issued 15 days ago with an interest rate of 4.62% trading close to 6.20%.
The yield entails that the new creditors will ask for a similar interest rate in order to participate in new issues of the island’s debt, since they can buy existing bonds trading in the LSE with relatively high yields.
Being aware of the challenges in the global markets, the Ministry has turned to issues of short-term debt in the domestic market in the past two months.
In the past month, it absorbed €400 million for a year with an interest rate of 2.98-3.15%.
The only borrowing from the European middle-term bonds program was in February 2011, when it borrowed €170 million with a private placement of a euro-bond at 4.75%. The issue was mostly covered by domestic creditors.
Part of the government’s short-term debt – nearly €550 million – expires during summer and nearly €1 billion expires in early 2012.
In the next few weeks, the Ministry is expected to borrow €60 million from the European Investment Bank for 20 years and in June €100 million more.
The Ministry does not exclude, however, to turn to foreign borrowing in the next few months if the conditions in Greece improve.
Although it bets on the improvement of the global conditions, it understands that things might worsen, affecting Cyprus’s terms of borrowing.
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