23/11/2020
The new price of Serbia’s financing is 1.066%! The Republic of Serbia today issued a ten-year eurobond in the international financial market, in the amount of USD 1.2 bn, at the coupon rate of 2.125% and the yield rate of 2.35%. These are the lowest interest rates so far, i.e. the best conditions our country has achieved in terms of financing in dollars. At the same time, aiming to shield public debt from FX risk, that is, from volatility in the exchange rate of the euro against the dollar, Serbia carried out its first ever hedging via swap operations, whereby it swapped liabilities under this eurobond from the dollar into the euro and thus achieved a de facto 1.066% coupon rate for financing in euros. This is the lowest financing rate our country has ever had and, though it is achieved in a time of global crisis, it is lower even when compared to Serbia’s coupon rate last year (1.50%).
“Today’s transaction is yet another confirmation that international investors recognise our country as a safe investment destination. Every appearance in the international market is a test of investor confidence in the sustainability of macroeconomic stability, which is particularly important today, given that such confidence is gained in a time when the global economy is faced with the greatest challenge since the Great Depression”, Governor Jorgovanka Tabaković said.
Prior to this, a delegation of the NBS and the Ministry of Finance had successfully completed all talks with international investors and financial institutions, thanks to which today’s auction showed very high investor demand for Serbian bonds. The demand was several times higher than the issued USD 1.2 bn (it exceeded USD 6 bn), and more than 200 renowned investors from all over the world showed interest in the bonds. Such high interest in Serbian bonds led to a significant decline in the yield rate during the auction (by as many as 40 bp) compared to initial conditions.
The bulk of funds raised in today’s transaction (USD 900 mn) will be used for the early repayment of a significant portion of outstanding debt in respect of expensive dollar eurobonds issued in 2011 (at the high yield rate of 7.50%). “In this way, our country again managed to replace the costly dollar debt with a cheaper one. The achieved interest rate is the lowest rate at which Serbia has borrowed in the international financial market thus far and several times lower than the one recorded in the previous issue of the ten-year dollar eurobond in 2011. At the same time, this is a confirmation that Serbia fully transformed its economy, that it entered this crisis well-prepared and that it is determined to eliminate the last remnants of irresponsible behaviour and expensive borrowing from the past, acting prudently and responsibly toward its people. This success puts Serbia among countries with investment grade, which, were it not for the crisis, would also be officially confirmed by rating agencies”, underscored the Governor.
What makes today’s auction unique, in addition to the best financing conditions ever and the first hedging transaction (hedging against FX risk), is the fact that it was realised for the first time within the Global Medium Term Note (GMTN) programme, which will significantly facilitate the process of Serbia’s future presentation in the international market, should that be necessary. The issued dollar eurobond will improve our visibility in the international market, because after a short spell, Serbia will be re-included in the benchmark EMBI on dollar debt – one of the most recognisable and most frequently followed indicators of the country risk premium.
“Today’s success is a result of the staunch determination of Serbia’s President, National Bank and Government to strengthen the economy and preserve macroeconomic, monetary, fiscal and financial stability. It is precisely the stability maintained for years already that reinforced Serbia’s resilience to external shocks and contributed to increasingly favourable financing conditions and keeping public debt below the Maastricht criteria, all of which enabled the provision of sizeable support to our citizens and businesses in an environment of high uncertainty and global coronavirus pandemic”, underlined Governor Tabaković.
Governor’s Office
