According to the latest news from Visatopia: As of early morning on June 11, Beijing time, the Cypriot Ministry of Finance announced on Tuesday that it has selected Deutsche Bank, Goldman Sachs, HSBC, UBS Investment Bank, and VTB Capital to manage the country's first sovereign bond auction since receiving external financial assistance. This highlights the country's ambition to quickly return to international financing markets just one year after being on the brink of bankruptcy.
The Cypriot Ministry of Finance stated that these banks will be entrusted to brief investors on the bond auction. The Ministry also indicated that, depending on market conditions, it may proceed with the issuance of euro-denominated bonds at a later date.
The easing measures announced by the European Central Bank last week have provided a new boost to the Eurozone bond market, which has been on an upward trend for two years. Borrowing costs for several countries plagued by sovereign debt crises have fallen to record lows.
A senior official from the Ministry of Finance told Reuters that the Cypriot government hopes to raise up to 500 million euros ($680.75 million) through the bond issuance, but the final figures, timing, and maturity dates will be determined after consultation with the managing banks.
The source said that the possibility of issuing bonds within this month cannot be ruled out. A Reuters report cited a source as saying, "In no sense should this be interpreted as an early end to the (economic) adjustment program; we wish to continue with reforms with the same determination." He was referring to a fiscal consolidation program jointly supervised by the International Monetary Fund and the European Union.
External creditors provided Cyprus with a 10 billion euro financial assistance package in March 2013, at a time when the country's banking system was in distress due to excessive exposure to Greek government bonds, and its financial system was struggling because it could not obtain funding through international debt markets.
If Cyprus can return to the market for financing, it would be the fastest recovery by a distressed country since receiving a bailout program.
On April 30, Cyprus sold a batch of 100 million euro ($136.15 million) six-year bonds in a private placement with a coupon rate of 6.5%. The timing of this issuance coincided with the European Medium Term Note program, which has a cap of 9 billion euros.
The source said that the funds raised through the public market bond sale will not be used to supplement the bailout program funds. "Any funds will be used for the management of existing public debt, rather than being covered by the (EU, IMF, and ECB) troika's financial assistance."
Cyprus has not borrowed through international debt markets since May 2011, when the yields on its existing benchmark bonds were too high, making external borrowing almost impossible. According to the existing economic adjustment plan, Cyprus would not return to financial markets for financing until at least the end of 2015.
However, benefiting from strong consumer spending and the tourism industry, Cyprus has consistently performed better than market expectations since receiving the bailout. Consequently, external creditors have repeatedly adjusted their economic forecasts to reflect a much milder economic recession than previously anticipated.
According to the latest assessment, the Cypriot economy will shrink by 4.2% in 2014, better than the initial forecast of a 4.8% contraction. Economic consultancy Sapienta stated in a report released on Tuesday that Cyprus's economic contraction in 2014 might be only 3.1%. Fiona Mullen, director of the agency, stated, "The recession has truly bottomed out."
