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Albania issues Eurobond worth 650 million euros, high demand in the markets! (10-year government maturity)

2025-02-12 09:14:49Biznes SHKRUAR NGA REDAKSIA VOX

Albania issues Eurobond worth 650 million euros, high demand in the markets!

The demand for Albanian Eurobonds presented by investors has been very high and reached a total amount of 3.7 billion euros.

Initially, the Ministry of Finance entered the process with an initial indicative yield of 5.5%, but strong market demand favored a lower yield than expected.

Yesterday's issuance was the second 10-year Eurobond of the Albanian government, after the one in 2021. Even in 2021, the loan amount was 650 million euros.

The yield was lower, at 3.75%, but interest rates in international markets were lower.

The process took place in November 2021, before the start of the inflationary wave and the start of the increasing interest rate cycle by central banks.

The European Central Bank's base rate for the euro in the period was still 0 (deposit rate -0.5%).

Currently, the base interest rate for the euro stands at 2.9% (that of deposits 2.75%).

The downward trend in interest rates has pushed the Ministry of Finance to return to the 10-year maturity, after in the last issue, in 2023, it came up with an offer for a 5-year Eurobond.

In general, in recent issuances, financial market investors have shown high demand for Albanian Eurobonds, which appear to offer a satisfactory ratio between benefits and risks.

The reduction in public debt in recent years (55.45% at the end of September 2024, according to the preliminary assessment of the Ministry of Finance) and the good performance of the economy in the post-pandemic period also led to an improvement in the country's sovereign debt rating by S&P Global Ratings and Moody's last year.

The rating agency "S&P Global Ratings" (Standard & Poor's) in March 2024 improved for the first time the long-term rating of Albania's sovereign debt from B+ to BB-, while in October the other agency Moody's also improved the rating from Ba1 to Ba3.

The improvement in the sovereign debt rating appears to have further positively impacted investor interest in Albanian government debt securities.

Even, for the first time last year, the Albanian government debt instruments market in lek has attracted institutional investors from abroad.

The 650 million euro Eurobond will serve partly to cover the budget deficit projected for 2025 and partly to refinance the Eurobond issued in 2018.

Of the 7-year 500 million euro Eurobond of 2018, a portion of 133.3 million euros was repaid ahead of schedule, through a buyback process, in 2023.

The remaining amount of 366.7 million euros will be repaid at maturity, in the fall of this year, with funds provided by this year's Eurobond.

The remaining amount, 283.3 million euros, will go to cover this year's budget deficit.


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