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State Boosts EXPO Bonds Issuance by 40 Billion Dinars

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The Serbian government has decided to increase the value of the issuance of eight-year EXPO bonds to a total of 150 billion dinars, which is 40 billion more than in September 2023 when the decision to issue this security was made, as announced in the Official Gazette.

At the first auction of EXPO bonds this year, on January 18, 63.15 billion dinars were sold at a yield rate of 6.15%, totaling 105.58 billion dinars across three auctions, indicating that the original issuance was practically sold out.

The amendment to the Decision on the issuance of long-term government securities, published in the Official Gazette on Friday, January 26, stipulates that the issuance amount will be 150 billion dinars instead of the initially planned 110 billion dinars, as outlined in the decision from September of last year.

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There have been no changes to the maturity or coupon rate, so the state EXPO bond with a nominal value of 10,000 dinars per unit matures on October 26, 2031, and carries a coupon rate of seven percent.

The Public Debt Administration had originally planned to offer EXPO bonds in three auctions in January, February, and March of this year, but in January alone, they managed to raise 63.15 billion dinars. This means that for the remaining auctions, less than five billion dinars were available in these securities.

By increasing the issuance, which was originally launched on October 24 of last year, there is now the possibility of offering an additional 40 billion dinars in EXPO bonds to investors in the auctions on February 5 and March 5.

In a conversation with about whether it is currently better for the state to borrow through dinar or euro bonds, Nenad Gujanicic, the main broker at Momentum Securities, pointed out that the state has been implementing a strategy of borrowing as much as possible on the domestic market in dinars for some time. He emphasized that such an orientation should be supported because it is better to have a higher percentage of debt in the national currency.

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“Of course, the policy of the exchange rate and the stability of the dinar have greatly helped in implementing this orientation, and buyers have not seriously calculated the exchange rate risk for a long time. This can be seen in the case of EXPO bonds issued for a longer period with yields that are quite close to the yields currently prevailing in the euro-denominated state bond market. So, it is always better to borrow in the national currency when possible,” Gujanicic said last week, ahead of the issuance of new three-year euro bonds.

Let’s recall that at the first auction of EXPO bonds held on October 24, the state secured nearly three times more money for the budget than planned – instead of the planned seven billion, it collected 19.19 billion dinars with a yield of 6.39 percent and “noticeable participation of foreign investors,” as stated in the announcement by the Public Debt Administration.

The original issuance was reopened on December 5, and the placement was worth 23.24 billion dinars with a yield of 6.3 percent. Then, on January 18 of this year, they were sold for 63.15 billion at a yield of 6.15 percent, and the good news for the state is that the yield trend is decreasing.

EXPO bonds are the youngest dinar-denominated bonds on offer, and the Public Debt Administration stated, regarding their issuance, that by selling these benchmark bonds, the state will provide funds to support the implementation of infrastructure projects within the specialized world exhibition EXPO, which will be held in Belgrade in 2027.

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