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Cost of borrowing sharply high

29/06/2011 11:16
The cost of the state borrowing was shot sharply high today, with the big commercial banks keeping their distance from this year’s highest issue, which seems to have been oversubscribed by the Cooperative Central Bank.

The average yield of the 2-year bills stood at 5% and the issue has been oversubscribed by €15 million.

According to a finance Ministry announcement, the competitive bids that were offered were of €667.6 million and the non-competitive of €47 million.

All bids of €714.6 million were accepted.

It is the highest issue of the year by the Ministry, which had borrowed around €1.2 billion from the domestic market in 2011, on a short term basis mostly.

The minimum and maximum price of the competitive bids that were accepted stood at €990.07 for every €1000 of nominal value of GRDS that represents an annual yield of up to 5% until the expiry.

In the previous issue of 2-year bills, in January 2010, the yield stood at 2.07%.

Despite the sharp increase in the cost of borrowing, the domestic yields are considerably lower than those of the international markets, averting the participation of the big banks.

According to sources, the two big banks did not participate in the issue today.

The yield of the 10-year Cypriot bond reached 8.18% for the first time today, the highest since February 2010 when it was issued with an interest rate of 4.68%.

Last August, the interest rate had dropped to 3.81%.

The increase of the 417 base points corresponds to additional annual interests of €42 million for every billion that the government borrows from the European markets.

The 5-year Cypriot bond reached 8.55% today (expiry in November 2015), which makes it attractive to all fund managers who have direct access to the international markets in relation to the domestic issues. The issue of the 5-year bond closed three weeks ago with an average yield of 5.56%.