The Albanian government's 10-year Eurobond issuance is expected this week

2025-02-11 07:56:00, Ekonomi CNA

The Albanian government is expected to issue its next Eurobond this week. According to financial market sources, the Eurobond will have a 10-year maturity, while the final amount has not yet been decided. The approximate value of the issue, announced by the government during the approval of the 2025 budget, is around 600 million euros.

However, this amount is indicative and, depending on the conditions offered by the market, an issue of an even larger value is not excluded. The new Eurobond is expected to serve partly to cover the budget deficit forecast for 2025 and partly to refinance the Eurobond issued in 2018.

The Albanian government attempted to make a partial buyback of this Eurobond in the fall of 2023, for an amount of 250 million euros. However, investor interest in selling the bond before maturity was not very high and the buyback offer was ultimately closed with the repayment of a total amount of 133.3 million euros.

The remaining 7-year Eurobond of 2018, of 366.7 million euros, will be refinanced at maturity, in October 2025. This means that most of the Eurobond foreseen this year will go to refinance the debt maturing in the fall, while the remaining part will go to cover part of this year's budget deficit.

The last Eurobond issuance by the Albanian government was in June 2023, with a 5-year maturity, a coupon of 6.25% and a yield of 6.125%. However, at that time market conditions were very different from the current ones. Euro interest rates were still in an upward cycle, before reaching their peak in September 2023. At the time of the Albanian Eurobond issuance, the European Central Bank's base interest rate was 3.75% (deposit rate 3.25%).

This was one of the reasons why the Ministry of Finance decided to issue a shorter-term maturity compared to the Eurobonds of previous years.

Currently, the interest rates of the European currency are in a new downward cycle. The base interest rate for the Euro stands at 2.9% (that of deposits 2.75%). In these conditions, it is expected that the price of borrowing will be more favorable and this has pushed the Ministry of Finance to return to longer maturity terms.

The Albanian government has four Eurobonds issued and still outstanding, namely: the 2018 issue, with a 7-year maturity, for an amount of 500 million euros; the 2020 issue, with a 7-year maturity, for an amount of 650 million euros; the 2021 issue, with a 10-year maturity, for an amount of 650 million euros and the 2023 issue, with a 5-year maturity, for an amount of 600 million euros.

Considering the partial repayment of the 2018 Eurobond, the stock of Eurobonds issued to the Albanian state currently amounts to approximately 2.27 billion euros. /Monitor.al