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ECONOMY

Cyprus Bonds’ Yields Decline below 3%

Cyprus Bonds’ Yields Decline below 3%

Cyprus bonds' yields declined on May 17 below 3% marking the lowest ever rates on Cypriot long-term bonds.

According to figures analysed by the Cyprus News Agency, the yields of Cypriot EMTN bond maturing in 2025 declined to 2.95% reaching a new all-time low.

The spread between the German 10year benchmark declined to 287 basis points from 370 points in the beginning of the year and 418 points one year before, a reduction highlighted by Klaus Regiling, Managing Director of the European Stability Mechanism. 

"The yields on public Cypriot debt have been coming down more than in other countries. The spread with Germany has narrowed more than for any other country in the recent months,” he told a press conference following the Eurozone Finance Ministers meeting in Malta in April.

Although Cypriot bonds continue to be regarded as "junk”, that is, below investment grade, the yield of the Cypriot benchmark is trading below the respective bond of Portugal, a country whose bonds enjoy an investment-grade rating.

As market experts told the Cyprus News Agency, the yields reflect how investors are pricing Cyprus in comparison with Portugal, whose borrowing cost has been contained by the European Central Bank public sector purchasing programme. Cyprus had minimal support from the ECB stimulus programme as it exited its €10 billion bailout programme in March 2016 and consequently the ECB removed the waiver that enabled Frankfurt to continue purchasing Cypriot bonds.

After domestic short-term treasury bills yields declined to negative territory, Cypriot EMTN bonds are also following a downward trajectory. The yield of the short-term Cypriot bond maturing in 2019 declined to 0.54%, while the bond maturing in 2020 declined to 0.94%. The yields of the bond maturing in 2022 and 2023 were trading at 2.16% and 2.63% respectively.

The yields, the premium demanded by investors to buy a country’s debt, reflect the image projected by the markets over a certain country’s economic outlook.

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