Bloomberg News

Slovenia Dollar Bond Yield Surges as Fed Trumps Asset-Sale Plans

June 24, 2013

Slovenia’s benchmark dollar notes slumped, sending the yield to more than 7 percent for the first time as concern the Federal Reserve is trimming stimulus outweighed government steps to overhaul the local bank industry.

The yield on Slovenia’s 2022 dollar bond, sold in October, jumped 24 basis points to 7.05 percent at 1:21 p.m. in Ljubljana, its eighth increase in nine days totaling 90 basis points, or 0.9 percentage point, according to data compiled by Bloomberg. The cost to insure the euro-member’s debt for five-years with credit-default swaps jumped to a two-month high.

The Alpine nation, whose financial industry pushed it to the brink of a bailout in March, last week approved an asset-sale plan and is working on recapitalization program for lenders as well as on transferring banks’ toxic debt to a special government agency. Fed Chairman Ben S. Bernanke said the U.S. central bank may end bond purchases by mid-2014 if the world’s biggest economy grows as policy makers expect, stoking a selloff in Treasuries and outflows from high-yielding assets.

“The move in Slovenia’s bond yields has been driven by global market conditions, and speculation about the tapering of quantitative easing by the US in particular,” Abbas Ameli-Renani, an emerging-markets economist at Royal Bank of Scotland Plc, said in an e-mailed comment today. “The move is less concerning than elsewhere in the region as Slovenia has secured funding until the first quarter of next year.”

Default Swaps

Slovenia sold $3.5 billion of notes last month, according to data compiled by Bloomberg. The yield on its euro-denominated securities maturing in 2018, which fell to a two-year low of 3.54 percent in January, climbed to 5.48 percent today, the highest since April 18, the data show.

Slovenia’s CDS increased eight basis points to a two-month high of 358, compared with 365 for Hungary and 235 for Turkey.

Prime Minister Alenka Bratusek, vowing the nation won’t need an international bailout, wants to sell state-owned assets to restore investor confidence. Lawmakers on June 21 approved a sales plan that includes Nova Kreditna Banka Maribor d.d., Telekom Slovenije d.d. as well as 13 other enterprises from the Ljubljana airport operator to the national air-carrier.

Slovenian banks such as Nova Ljubljanska Banka d.d., agreed to sell the 53 percent of retailer Mercator Poslovni Sistem d.d. to its Croatian competitor Arokor d.d. for 240 million euros. The transaction, set to be completed by year’s end, would help repair lenders loan books.

“Were it not for the poor global market conditions, this deal would have been cheered by investors,” Ameli-Renani said of the Mercator announcement.

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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