Serbia’s borrowing costs declined at today’s bond auction, where investor bids fell short of the government’s sale plan, as the Balkan country secured a $500 million loan agreement with Russia.
The government sold 3.46 billion dinars ($40.5 million) of seven-year bonds, compared with its 5 billion-dinar target, the Debt Management Agency in Belgrade said in a statement. The yield dropped to 12.25 percent from 12.65 percent at the previous sale on March 5. Demand was 3.86 billion dinars, compared with 3.8 billion dinars last month, the agency said.
Serbia and Russia signed a loan agreement, with a $300 million tranche available “soon” and a further $200 million to follow after Serbia signs a new precautionary loan program with the International Monetary Fund, Russian Finance Minister Anton Siluanov said in Moscow today.
Yields have been pushed lower because “the sovereign has borrowed heavily” from abroad “having just clinched a $500 million deal with Russia,” Hypo Alpe-Adria Bank DD analysts, including Hrvoje Stojic, wrote in a note today. “Favorable interbank liquidity conditions” also helped, they said.
Junk-rated sovereigns, including Serbia and Hungary, have tapped foreign debt markets this year to take advantage of low borrowing costs as central banks from the U.S. to Japan buy bonds to boost liquidity. Serbia sold $3.25 billion in foreign- currency bonds since September, equivalent to 8 percent of the country’s gross domestic product.
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