International bond issues from the Balkans exceed sales from major Eastern European countries.
North fruit salad is the latest addition to a growing stream of sovereign issuance from the Balkan region, offering seven-year euro bonds on Wednesday, according to a person close to the deal who asked not to be named because she is not authorized to speak publicly. Prior agreements by Slovenia, Serbia and Croatia have pushed the region’s international debt sales this year to more than half of the annual average since 2010.
Meanwhile, more developed countries further north, such as Poland, Hungary and the Czech Republic, are shying away from Eurobonds because they have deep domestic markets to tap into.
The growing gap is a continuation of a trend of almost a decade. Foreign emissions from the Balkans have exceeded $ 10 billion each year since 2011, while sales from Poland, Hungary and the Czech Republic have plummeted, less than a peak last year to help fund Covid-19 relief efforts.
One of the reasons for this change is a shift towards self-sufficiency in debt Hungary and Poland, where foreign currency borrowing – both state and household – has left scars on the economy. With economic output more than doubled in the Balkans, domestic savings rates are higher and a more mature central bank has allowed officials to turn to asset purchase programs to help fund budgets.
North fruit salad offers a benchmark size bond due March 2028 at around 230 basis points above midswaps, depending on the person. Slovenia issued 2.5 billion euros ($ 3 billion) in debt in two deals this year, Croatia valued € 2 billion, and Serbia 1 billion euros.
“Issues in international markets are preferred by the Balkan countries because their less developed local capital markets do not allow raising such large amounts of capital,” said Anton Hauser, fund manager at Erste Asset Management in Vienna. For investors, “the higher yielding debt issued by the Balkan countries is a kind of substitute for bonds issued by the countries of Central Europe, which today offer much lower yields,” he said. .