East Europe’s Long Bond Sales Will Test Investor Appetite

(Bloomberg) -- Eastern European countries will test investor appetite for record-long debt as they seek to lock in low borrowing costs.

Croatia plans to offer a 20-year euro bond as part of a two-tranche sale, according to a person familiar with the matter. Serbia opened books on a 12-year note in euros on Wednesday, the longest maturity for its hard-currency sale on record.

“Serbia and Croatia clearly want to lock in the currently still low yield levels for quite some time,” said Anton Hauser, a money manager at Erste Group Bank AG’s investment arm in Vienna. “With investors desperate for yield, demand for long maturity bonds offering some pick up will be strong.”

Balkan nations are raising funds amid Covid-19 relief efforts as they grapple with the third waves of the pandemic. Last month, Slovenia priced 60-year debt, the region’s longest international bond.

The offerings of long-dated bonds are coming at a time when yields in that part of the curve are rising globally. The worry among investors is that strong economic growth, vaccine rollouts and generous government policies have the potential to unleash price pressures that could upend debt markets around the world.

Serbia is offering notes due March 2033 at a spread of 210 basis points to 215 basis points above midswaps, said the person, who asked not to be identified because the information isn’t public. The deal is managed by BNP Paribas SA, Citigroup Inc., Deutsche Bank AG and Erste Group Bank AG.

Croatia will also sell 12-year bonds, alongside the 20-year tranche, via JPMorgan Chase & Co., Morgan Stanley, Societe Generale SA and UniCredit SpA’s Zagrebacka Banka dd.

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