Slovenian borrowing costs fell from close to a record as higher-yielding European bonds advanced amid speculation major central banks will maintain stimulus.
The yield on the dollar-denominated securities maturing in 2022 fell 40 basis points from yesterday to 6.033 percent at 1:43 p.m. in Ljubljana, after rising to an all-time high of 6.527 percent on June 11. The yield on the euro-denominated 10-year bond dropped 17 basis points to 6.348 percent.
“The move is driven by external factors, it isn’t a sign of a change in trend,” Jaromir Sindel, an economist at Citibank AS in Prague, said by phone today. “The next key point will be the external audit of bank assets, which will determine how much financing pressure the government will face.”
Bonds in Europe advanced today, led by euro-periphery nations such as Spain and Italy, amid speculation the Federal Reserve will maintain its program of record easing after the next week’s policy meeting. The stimulus is helping revive demand for Slovenian debt, after concern over the Adriatic country’s banking industry pushed it to the brink of a bailout.
The country, which is battling its second recession since 2009, is pushing for an economic overhaul, including a bank recapitalization plan, to avoid asking its European Union partners for help. The European Commission forecasts the economy will resume growth as late as in 2015.
The Cabinet of Prime Minister Alenka Bratusek last month sent to the European Commission in Brussels a plan to boost capital of its banks with about 900 million euros ($1.2 billion) and repair their balance sheets by transferring bad loans to the state-owned bank asset management company.
Slovenia also wants to sell some state assets like Nova Kreditna Banka Maribor d.d. and Telekom Slovenije as its budget gap is set to almost double to a 7.9 percent level by year’s end.
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