Foreign investors are rebuilding positions in Serbian government securities, attracted by yields of around 5 per cent, exchange-rate stability and the country’s investment-grade rating from S&P. The recovery remains modest, however, leaving the domestic bond market more dependent on Serbian banks and institutional investors than it was before the pandemic.
At the end of June 2026, non-residents held RSD 124.3 billion, or approximately €1.06 billion, of Serbia’s dinar-denominated government securities. Their share of the outstanding dinar portfolio reached 15.2 per cent, recovering from 12.2 per cent in 2025, the lowest level recorded in roughly a decade.
The increase represents a partial restoration of foreign demand rather than a return to the market conditions prevailing before 2020. At the end of 2019, non-resident holdings were worth approximately RSD 233 billion, close to €2 billion, and accounted for more than 30 per cent of Serbia’s government-securities portfolio.
Foreign participation has therefore recovered by around three percentage points from last year’s low, but remains only about half its 2019 share. In nominal terms, foreign holdings are still approximately RSD 109 billion below the pre-pandemic peak, even before adjusting for inflation and growth in the government’s overall financing needs.
The distinction matters because foreign participation in local-currency debt is one of the clearest indicators of the depth and credibility of a sovereign bond market. International investors buying dinar bonds assume not only Serbian sovereign risk but also exchange-rate and liquidity risk. Their willingness to hold longer maturities reduces the state’s dependence on foreign-currency borrowing and can broaden the buyer base beyond domestic banks.
Serbia’s central-government debt increased by RSD 16.2 billion, or approximately €138 million, during June, reaching RSD 4.847 trillion, equivalent to around €41.3 billion. Central-government debt stood at 43.8 per cent of GDP, while general-government debt was slightly higher at 44.1 per cent.
The debt ratio remains moderate compared with many EU economies, but the currency structure is less comfortable. At the end of June, 79.1 per cent of Serbia’s public debt was denominated in foreign currencies. The euro accounted for 62.4 per cent, the US dollar for 11.3 per cent, Special Drawing Rights for 5.3 per cent, and other currencies for approximately 0.2 per cent. Dinar debt represented only 20.9 per cent of the portfolio, up from 20.3 per cent in May.
That modest increase in the dinar share followed the reopening of Serbia’s five-year benchmark bond in June. The state sold RSD 27.61 billion, significantly above the initially advertised reopening amount, after receiving bids of approximately RSD 31.04 billion. The bond carries an annual coupon of 4.5 per cent, matures in July 2030 and was placed at a yield to maturity of 5 per cent.
The June auction was considerably stronger than the earlier reopenings of the same instrument. Serbia sold RSD 15.97 billion in February at a yield of 4.55 per cent, followed by RSD 2.67 billion in March at 4.55 per cent and only RSD 2.16 billion in May at 4.59 per cent. The jump in demand at the June auction came only after the yield moved higher, suggesting that the return of foreign capital remains price-sensitive.
For an international investor, a nominal dinar yield of 5 per cent must compensate for Serbian inflation, potential currency depreciation, limited secondary-market liquidity and the opportunity cost of holding other emerging-market or euro-denominated assets. The premium is not especially large when compared with Serbian euro debt yielding in the mid-4 per cent range. The trade becomes attractive largely because of the dinar’s long period of stability against the euro.
This stability has been supported by the National Bank of Serbia’s managed exchange-rate regime and substantial foreign-exchange reserves. It reduces observed volatility but does not remove the underlying currency exposure. Foreign investors remain alert to Serbia’s current-account position, energy-import requirements, foreign direct investment inflows and the central bank’s capacity to intervene.
The stronger June auction should therefore be read as evidence that investors will return at the right price, rather than proof that Serbia has fully restored its pre-pandemic local-debt investor base.
The country’s sovereign rating provides a more favourable starting point than it did in 2019. S&P rates Serbia BBB- with a stable outlook, placing it at the lowest investment-grade level. Fitch assigns BB+ with a positive outlook, one step below investment grade, while Moody’s rates the sovereign Ba2 with a stable outlook.
S&P’s upgrade in October 2024 expanded the potential investor universe because some regulated funds and institutional mandates can only hold investment-grade securities. The effect has been more visible in international Eurobond transactions than in the dinar market. Many foreign investors that are comfortable with Serbian credit risk still prefer instruments denominated in euros or dollars, where currency exposure is removed and secondary-market liquidity is deeper.
Serbia demonstrated this distinction through its inaugural multi-currency international issue in April 2026. The sovereign placed three tranches with a combined value of approximately €3 billion equivalent, while investor demand exceeded €8 billion.
The package included a €1 billion five-year Eurobond carrying a 4.25 per cent coupon, a €900 million 12-year green bond with a 4.875 per cent coupon, and a $1.25 billion ten-year bond. The dollar liability was immediately swapped into euros, producing an effective euro coupon of approximately 4.66 per cent and reducing the state’s exposure to fluctuations between the dollar and the euro.
Part of the proceeds was used to buy back €870.76 million of the Eurobond maturing in May 2027. Approximately €1.13 billion of that issue remains outstanding and will need to be repaid or refinanced by maturity.
The transaction demonstrated strong international appetite for Serbia’s external debt, but it also contributed to a sharp rise in the nominal debt stock during May. The central-government debt increased by almost €2 billion that month, although part of the new borrowing represented pre-financing and liability management rather than an immediate deterioration in the underlying fiscal position.
June produced a more balanced flow. Serbia raised RSD 27.6 billion through dinar securities and drew approximately RSD 10.9 billion from project and programme loans, while repaying RSD 36.7 billion of existing obligations. The state subsequently announced that it did not plan additional government-securities auctions during the third quarter of 2026, having largely completed its financing programme for the first half of the year.
The financing structure shows that Serbia is operating several debt markets at once. International Eurobonds, at almost €12.5 billion, represent the largest single creditor category. Dinar government securities account for close to €7 billion, while loans from commercial banks amount to approximately €5.3 billion.
Debt to the Export-Import Bank of China stood at around €2.77 billion after Serbia repaid approximately €60 million in June. China Exim remains the country’s fourth-largest individual creditor, reflecting years of bilateral financing for transport, energy and infrastructure projects. Serbia also repaid almost €90 million to the International Monetary Fund, reducing its outstanding IMF obligations to approximately €2.1 billion.
This mix has enabled the government to finance a large infrastructure programme without pushing the debt-to-GDP ratio towards the levels recorded during the fiscal pressures of the previous decade. It has also created a more complex creditor and currency structure. Commercial bank loans, bilateral project finance, IMF obligations, international bonds and domestic securities carry different maturities, covenants, interest-rate profiles and refinancing risks.
The renewed interest in dinar securities helps at the margin because every additional local-currency issue reduces the need to assume new foreign-exchange liabilities. A larger dinar market also creates a domestic yield curve that can serve as a benchmark for corporate bonds, municipal borrowing and long-term financial products.
Yet the current structure remains far from the government’s earlier progress on dinarisation. The share of dinar debt had risen to more than 30 per cent in 2020, but subsequently declined as Serbia turned more heavily towards international markets and foreign-currency project loans. At 20.9 per cent, the local-currency share is now close to levels last seen roughly a decade ago.
The challenge is not simply issuing more dinar bonds. Serbia must create sufficiently large benchmark lines, predictable auction calendars and active secondary-market trading so that international funds can enter and exit positions without materially moving prices. Foreign investors require reliable repo facilities, transparent pricing, custody arrangements and protection against liquidity concentration.
Secondary-market turnover in Serbian government securities reached RSD 153.2 billion during the first six months of 2026, with dinar instruments accounting for 83.8 per cent of the total. This provides a functioning market, but it remains small relative to the volumes handled by investors operating across Central and Eastern Europe.
Domestic banks remain natural buyers because government bonds can be used for liquidity management, collateral and regulatory purposes. Their presence provides a stable funding base for the state but also creates concentration. When banks allocate large parts of their portfolios to sovereign securities, the financial system becomes more closely linked to government credit, while less balance-sheet capacity may be available for lending to companies and infrastructure projects.
A broader foreign-investor base would reduce that concentration, but it would introduce another form of risk. International portfolio flows can reverse quickly during geopolitical shocks, global interest-rate repricing or regional currency pressure. The fall in foreign participation after 2019 illustrated that local debt markets can lose external demand even when domestic sovereign fundamentals remain relatively stable.
The maturity profile provides Serbia with some protection against an immediate refinancing shock. There are no significant dinar bond repayments during the next approximately 18 months. Around RSD 155 billion falls due in the subsequent six-month period, followed by another RSD 135 billion between mid-2029 and mid-2031. The largest block, approximately RSD 525 billion, matures after that period.
Euro-denominated domestic securities have a somewhat earlier repayment schedule. Around €221 million is due within the next six to nine months, followed by another €101 million by mid-2027. Approximately €1.2 billion falls due after mid-2031.
The relatively extended maturity profile gives the Public Debt Administration room to choose between domestic auctions, international issuance and bilateral or multilateral borrowing. It also allows the state to avoid issuing into an unfavourable market merely to meet short-term redemptions.
Borrowing costs remain the more persistent issue. Serbia’s debt ratio is around half the EU average, but its interest burden is not proportionately lower because the sovereign pays a higher risk premium than core European borrowers. The 4.25–5.1 per cent coupon range seen across recent euro and dinar issues is manageable, but substantially above the ultra-low rates available before the global tightening cycle.
This places greater weight on the quality of public investment financed with debt. Borrowing at around 5 per cent can be economically justified when it supports productive transport, energy, environmental or industrial infrastructure with measurable effects on output and tax revenue. The same financing becomes more difficult to sustain when it covers projects with weak economic returns, persistent cost overruns or limited transparency.
Foreign holdings of dinar securities are therefore a useful but incomplete measure of confidence. The increase to RSD 124.3 billion confirms that Serbia can attract non-resident demand when yields and currency expectations align. The distance from the RSD 233 billion peak of 2019 shows that investment-grade status has not yet translated into a fully internationalised domestic bond market.
The next stage depends on whether Serbia can enlarge the dinar share of its debt without offering a disproportionately high yield premium. A deeper local market would lower foreign-exchange exposure, diversify funding and strengthen the financial system’s domestic pricing infrastructure. For now, the sovereign retains easier access to foreign investors through Eurobonds than through dinar securities, leaving the state’s balance sheet exposed to the currency composition it has spent years trying to improve.
