The Government of Serbia has decided to raise the amount of its 10.5-year dinar bond issue to 180 billion dinars, an increase of 60 billion dinars. This decision was officially announced in the Official Gazette following a meeting on February 6, signed by outgoing Prime Minister Miloš Vučević.
The bond issue, initially launched on January 23 with a planned value of 120 billion dinars, saw strong demand, with a total of 111.34 billion dinars raised. During the auction, demand peaked at 154 billion dinars. The minimum offered return was 4.5%, much lower than the 5.25% coupon rate, while the highest offered rate was 5.95%. The average accepted return rate was 5.02%.
The Public Debt Administration accepted 70 offers from various sectors, including 26 from the banking sector, 30 from other legal entities, and 13 from client custodians. One individual also participated in the auction and had their offer accepted.
The decision to increase the bond issuance did not alter any elements of the initial terms, aside from the amount. Financial experts, including Professor Nikola Stakić from Singidunum University, noted that the bond achieved its objective of attracting investments with its attractive coupon rate. The average weighted yield to maturity of 5.02% reflects Serbia’s current credit rating and the long maturity risk associated with the bond.
The reason the full issue was not sold, according to Stakić, lies in the range of returns investors were seeking—between 4.5% and 5.95%. Some investors may have been looking for higher returns due to concerns about inflation, a higher deficit, and an increase in the average interest rate Serbia pays on public debt.
Interestingly, one natural person also purchased bonds during this auction. Nenad Gujaničić, a broker from Momentum Securities, warned that the long maturity of the bond increases its exchange rate risk. He emphasized that exchange rate stability, which has been observed in recent years, may not continue, and any potential depreciation of the dinar could reduce real returns for bondholders. However, if the exchange rate remains stable, the bond offers a solid return.
Despite the decision to raise the bond issue, the Public Debt Administration has not yet announced any new auctions for the first quarter. The next auction is scheduled for March 11, where an additional 30 billion dinars of bonds will be offered.
In January, the Ministry of Finance highlighted the notable participation of foreign investors, accounting for over 40% of the demand, reflecting strong interest in Serbia’s government securities and a preference for long-term bonds.
