Treasury has issued domestic GMTN Notes with the lowest ever yield 15/10/2020
On Wednesday, 14th October, for the first time Eurobonds with maturity on 7 October 2026 previously issued under the GMTN programme of the Republic of Latvia, acting through the Treasury, were reopened and offered in auction in domestic market only.
The auction participants showed a very good interest in Eurobond domestic offering and total demand reached 151.5 million EUR. Having high demand for domestic GNTN Notes, the competitive multi-price auction was closed with the total nominal value of 20 million EUR sold, thus bid-to-cover ratio was 7.6. The weighted average yield rate was negative -0.326% and it is the lowest ever yield in the history of Latvian government debt securities in the primary placement.
Minister of Finance J.Reirs: “This is an excellent result reaching historically lowest level of interest rate and starting a new level of Latvia’s capital market development, while providing the availability for additional instrument for the domestic investors”.
The financial instrument i.e. Notes offered in domestic market under the GMTN programme of the Republic of Latvia, which the Treasury has previously issued in the international capital market with syndication method on primary placement, will now be available in domestic market by offering securities to Primary dealers only. This will ensure domestic investors, such as pension funds, insurance companies, banks and other market participants, with a access to the tap offerings of domestic GMTN Notes and accordingly will broaden the investment spectrum that is available in primary market.
The high liquidity of Eurobonds is a contributing factor of total demand and interest of investors i.e. outstanding amount of particular 2026 Eurobonds are 1.5 billion EUR and are traded also internationally. As these Eurobond taps sold in domestic auction are fully fungible with already outstanding GMTN Notes, it will promote the secondary trading activity of this instrument in Latvia and internationally.
By introducing the availability of new instrument in auctions, it will allow the Treasury to be more flexible combining the offering in domestic market also with longer tenors of Notes which previously ensured by Eurobond issuances in international capital markets.
In general, there are expectations that such activities will increase trading in government bond market, boost interest of domestic investors and is the step in the further development of the capital market of Latvia.
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