June 17, 2014 / 3:22 PM / 4 years ago

UPDATE 1-Cyprus begins marketing June 2019 euro benchmark at 5% area

(Adds comment, background)

By Sarka Halas

LONDON, June 17 (IFR) - The Republic of Cyprus has started marketing its first post-bailout public debt sale at 5% area against a weaker market backdrop for peripheral sovereign issuers.

Deutsche Bank, Goldman Sachs, HSBC, UBS and VTB Capital are arranging the sale, which is expected to be priced on Wednesday and which will mark the fastest return to market by a rescued country.

Peripheral sovereign bond yields that hit euro-area lows last week have moved higher this week. The Spanish 10-year Bono is at 2.71%, while the Italian 10-year BTP is at 2.82%, 15bp and 12bp off the lows hit last Monday.

However, a banker away from the deal said that the 5% area guidance left little to chance.

“Cyprus is giving a lot of margin; at this price it has to be a success,” he said.

Greece sold a five-year bond at 4.95% in April, tighter than initial price thoughts of 5%-5.25%. It was quoted at 4.20% today and is the main reference point for Cyprus’s new benchmark.

“This would be the last piece in the jigsaw of European counties returning to market,” said a banker, adding that the order books could be very strong for Cyprus’ upcoming bond sale.

“This will be a higher yielding asset for investors and may be seen as representing good value against other eurozone trades,” added Stuart Culverhouse, chief economist, Exotix Partners.

Cyprus was shut out of the international markets in May 2011 on heightened fears of an accelerating European sovereign debt crisis. This caused its bond yields to spike above 14%.

Last year, and due to a collapsing banking system heavily exposed to Greece, Cyprus was the recipient of a 10bn bailout.

Since then, however, it has shown stronger-than-expected economic performance and full compliance with the European Stability Mechanism and International Monetary Fund adjustment programme.

Cyprus is rated Caa3/B/B- by Moody‘s/S&P/Fitch (positive/positive/stable).

Back in April, the sovereign was raised one notch by S&P amid a diminishing threat of its not being able to meet loan repayments. Moody’s will be next to review the country’s rating, on July 18. (Reporting by Sarka Halas; editing by Helene Durand)

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