Bond issuance confirms Cyprus government’s intent for further debt reduction, investment firm says

Cyprus has demonstrated flexibility in choosing its timing to enter the markets for the issuance of a 7-year bond, which sought to raise €1 billion, according to investment firm Athlos Capital.

Ultimately, the Republic of Cyprus received offers amounting to €9.6 billion. At the same time, a capped €500 million early repayment offer was proposed for a €1.5 billion bond maturing in 2028, carrying a 2.375 per cent interest rate.

Athlos Capital, which specialises in the trading of fixed income instruments in the bond markets of Cyprus and Greece, explained that the new bond comes as Cyprus secured a sufficient liquidity cushion to cover its financial needs for 2024 and 2025, thanks to prudent fiscal policies in recent years.

Despite market uncertainties following the European elections, notably due to political developments in France, recent credit upgrades by Fitch and Standard & Poor’s created favourable conditions for the issuance.

“Although Cyprus did not have an immediate need for funds, the Finance Ministry opted for the issuance, seeing it as crucial for Cyprus’ presence in international markets and for maintaining regular investor engagement,” the investment company explained.

The issuance proved highly successful, with investor interest reaching €9.6 billion, as mentioned above. The interest rate settled at 3.31 per cent (MS + 55bps), slightly lower than the initially estimated 3.36 per cent (MS + 60bps).

“The interest rate is deemed satisfactory given Cyprus’ size and the relatively lower liquidity of its bonds compared to other EU countries with similar credit ratings,” commented Athlos Capital’s financial analyst, Fanos Vladimirou.

Meanwhile, despite Cyprus facing repayments of €1.85 billion for two bonds in 2024 (one in June and one in December), the Finance Ministry proposed a buyback of up to €500 million for bonds maturing in 2028.

The company explained that this move confirms the government’s commitment to significant public debt reduction in the coming years, both as a percentage of GDP and in absolute terms.

Moreover, Athlos Capital stated it played a significant role in this issuance, underscoring its involvement in Cyprus’ financial markets.

“It’s noteworthy that through its innovative investment platform, Sophic, Athlos Capital secured over 80 per cent of the total €21.5 million in Treasury Bills issued by the Republic of Cyprus last Monday, ” the company said.

“These bills, yielding 3.74 per cent, were made accessible to retail investors via the Sophic platform,” it concluded.