BRATISLAVA, November 29, (WEBNOVINY) — The current weak demand for Slovakia’s government bonds does not jeopardize debt service coverage yet. Finance Minister Ivan Miklos says that the first serious test will come in late January, when the country will have to repay a two-year bond issue worth almost EUR 900 million.
Miklos noted that the unsuccessful or partly unsuccessful issues were intended as a reserve for next year and were not to be used as source of urgent funding. Slovakia can function on short-term borrowings. At a news conference on Tuesday, the minister highlighted that the first bigger issue will take place at the end of January.
The present situation on financial markets reflects panic and is not based on economic fundaments. Investors show meager demand for governments bonds of other eurozone countries, as well. “The situation is so unusual at the moment that I assume it is not sustainable in the long run and that it will not persist. You will certainly admit that it is not normal that Germany is unable to borrow money and that it is a matter of panic rather than of the real condition of these economies,” the minister elaborated.
Slovakia managed to sell bonds for a mere EUR 28 million in the past two auctions over the past two weeks. Finance Ministry’s Debt and Liquidity Management Agency (ARDAL) had to cancel the first auction held in mid-November.
Analysts see persisting influence of investors’ sentiment in the eurozone on the Slovak bond market. Weak demand and growth of yields thus do not reflect solely local factors. „Future development of yields will depend on solutions offered by EU leaders. Whether they will manage to defuse the situation will also be important. A further increase in yields cannot be ruled out in spite of solid economic fundaments of the Slovak Republic,” Slovenska sporitelna analyst Sona Muzikarova observed. Additionally, analyst with Volksbank Slovensko Vladimir Vano drew attention to another factor, uncertainty on the regional market ensuing from the tense situation in Hungary.
SITA