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20 July, 2024
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Cyprus eyes market return with ten-year bond

Geopolitical tensions delay Cyprus' market re-entry plans


Cyprus is gearing up to re-enter the financial markets in the near future to capitalize on the recent positive momentum bolstering its economy. According to sources familiar with the matter at the Cyprus News Agency (CNA), the Ministry of Finance is contemplating issuing a ten-year bond. The exact issuance details, including the final amount to be raised, will be decided in consultation with financial advisors and contingent upon market conditions.

The decision comes on the heels of significant credit rating upgrades by leading agencies like Fitch, Standard & Poor's, and Moody's. Fitch and Standard & Poor's elevated Cyprus's long-term credit rating to BBB+, highlighting favorable prospects, while Moody's maintained a positive outlook with a BBB rating in its latest assessment at the end of the previous month.

The Office of Public Debt Management (DGDX) has already outlined plans for a robust annual financing program totaling €1.3 billion for this year. A substantial portion, €1 billion, will be secured through the issuance of a European Medium-Term Note (EMTN). Looking forward, DGDX aims to issue at least one reference bond annually, raising between €1.0 billion to €1.5 billion, to meet the government's financing requirements, as outlined in their 2023 annual report.

Furthermore, the Debt Management Office (DGG) underscores a strategic focus on lengthening the maturity curve through the issuance of longer-term bonds, capitalizing on favorable market conditions and a supportive interest rate environment.

Despite initial plans for market re-entry several weeks ago, geopolitical tensions related to discussions of potential military deployments to Ukraine by French and German leaders led to market instability, temporarily delaying Cyprus's international market plans.

Cyprus's economic resilience, underscored by a steady decline in the debt-to-GDP ratio driven by robust growth rates, positions the country favorably within the European Union. In the first quarter of this year, Cyprus recorded the second-highest quarterly growth rate (1.2%) and the third-highest annual growth rate (3.4% seasonally adjusted), following closely behind Malta and Croatia.

As Cyprus navigates these developments, the Ministry of Finance remains poised to leverage recent economic improvements and strategic financial maneuvers to sustain its fiscal trajectory amidst evolving global dynamics.

[Information sourced from CNA]

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