Cyprus gearing up to tap international markets following upward ratings momentum

The Finance Ministry is considering to tap international capital markets, utilising the positive momentum generated after repetitive upgrades of Cyprus sovereign credit rating by international ratings agencies.

Cyprus has enjoyed two upgrades by rating agencies Standard and Poor’s and Fitch to “BBB+” with a positive outook in the last two weeks, while Moody’s has revised Cyprus’ outlook to positive while affirming its Baa2 rating. Since 2023 Cyrpus’ long-term credit rating has been upgraded to invest-grade status by all rating agencies.

Sources have told CNA that the aim of the market exit is a ten-year bond, noting however that issues like the maturity and final amount to be issued are determined in consultation with the issuance’s advisor (to be assigned by the Public Debt Management Office, PDMO) as well as the prevailing market conditions.

The PDMO said that Cyprus financing needs for 2024 amount to €1.4 billion, of which €1 billion will be secured by an issuance via the European Medium-Term Note programme.

Furthermore, the PDMO said in its annual report for 2023 that the aim for the next years is to issue bonds worth at least between €1 and €1.5 billion EMTN bonds annually, with a view to secure the government’s annual financing needs.

The PDMO’s aim is to smoothen Cyprus’ debt maturity curve, with longer maturity bonds, provided that the market conditions and the high-interest rate environment permit it.

The same source said the momentum for Cyprus, following the recent credit rating upgrades, is favourable.

Positive momentum is also created by the steadily declining trend in the debt-to-GDP ratio which is also favoured by Cyprus’ strong growth rate, which in the first quarter of 2024 amounted to 3.4% year on year, that was the third highest in the EU following Malta and Croatia, while in quarterly terms, Cyprus exhibited the second highest (1.2% seasonally adjusted) growth rate behind Malta.

(Source: CNA)