Bloomberg News

Serbia Selling Dollar Bond at Lowest Yield Before New IMF Talks

February 14, 2013

Serbia is selling its second dollar bond since November as the government takes advantage of low borrowing costs to raise cash for budget financing before it returns to aid talks with the International Monetary Fund.

The Balkan nation plans to sell 7-year dollar bonds today at a yield of about 5.20 percent, according to a person with knowledge of the offering, who asked not to be identified because the information is private. Serbia, which sold five-year dollar notes in November priced to yield a record low 5.25 percent, plans to raise $2 billion in foreign debt in 2013 in 7- year and 10-year bonds, according to the budget.

Serbia will turn to foreign debt markets with or without an IMF deal, Finance Minister Mladjan Dinkic said in an interview on Jan. 15. Bond buying by central banks in the U.S. and the euro region has stoked appetite for riskier assets over past months and allowed junk-rated issuers such as Hungary to gain funds on the market and bypass the IMF.

“This latest deal seems to offer a bit of new issuance premium, but not the extreme mispricing that we have seen with some of the recent Serbia deals,” Timothy Ash, chief emerging- markets economist with Standard Bank Plc in London, wrote to clients today.

The yields on the nation’s outstanding 2017 dollar bonds were unchanged at 4.393 percent at 3:20 p.m. in Belgrade, while the 10-year dollar notes were at 5.299 percent, up one basis point, or 0.01 percentage point, from yesterday.

Serbia, which raised $1.75 billion in two Eurobond sales last year, expects the IMF to arrive in May for talks on a new precautionary loan, Dinkic said Feb. 7.

The government hired Deutsche Bank AG, JPMorgan Chase & Co. (JPM:US) and Barclays Plc to arrange bond sales this year as Premier Ivica Dacic’s cabinet needs funds to shore up the budget and keep the former Yugoslav republic’s economy growing after the euro region’s financial crisis hurt demand for its products and cut foreign investment.

To contact the reporters on this story: Lyubov Pronina in London at lpronina@bloomberg.net; Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; James M. Gomez at jagomez@bloomberg.net


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