This financial instrument is similar in terms of structure to the Albanian government bonds issued in domestic market through auctions of securities, but the difference stands because: (i) it is marketed exclusively in international financial markets, and not on the domestic market (ii) is denominated in euro and not in ALL.
Some of the key features of Eurobond (final terms and conditions) are described below :
• Issue Amount: EUR 300,000,000
• Maturity Date: 04 November 2015
• Listing: London Stock Exchange
• Re-offer price: 99.496
• Re-offer yield: 7.625
• Coupon: 7.50
From the above data is seeing that this instrument is a 5-year bond, which is traded at London Stock Exchange. For the buyer’s of Eurobonds (London Stock Exchange) are of particular importance both data: (i) coupon, which determines the amount of interest that the instrument holders will receive each year and (ii) interest quoted in the market or known as yield which varies depending on market conditions and determined by market demand and supply.
Since the yield moves in the opposite direction of prices, to holders of Eurobonds, is convenient having low interest (or at least this indicator remain near the initial one), in order to result in profit cause of the price raised.
The following chart gives a historical performance of Eurobond in financial markets.
Source: Ministry of Finance; Reuters
Analysis and Comments: Open Data Albania (ODA)
Analyzing the performance of yield since November 2010 is notice that the interest rate or yield rose at the level of 9:03% compared with 7. 625% that had in time of issue, and it shows that some initial buyers have sold immediately, causing the reduction in prices and raising interest rates. From December 2010 until May 2011 the yield has relatively unchanged, or with a slight trend, which means a balanced demand-supply for this instruments by investors.
After June 2011 the yield has only been increasing, reaching the highest level of 12.07% in December 2011. This negative performance has as main cause the deterioration of European financial markets as a result of sovereign debt crisis that has affected the European Union member states, and especially Greece and Italy. This crisis has caused panic to investors who are attracted by the Eurobonds acquisitions of European countries and in those cases where they have bought these kinds of instruments they have looked after high rate of yield as a result of the perception of high risk investment. In this way also for the Albanian Eurobond they have required higher yields explaining his poor performance.
Yield statistics are shown in the following table:
Source: Ministry of Finance; Reuters
Analysis and Comments: Open Data Albania (ODA)
In conclusion it should be noted that the current level of yields of this Eurobonds implies a difficulty for the Albanian Republic of having a new successful issue of this kind of instruments as long as this title is currently perceived as a high risk investment.
All the information is shown in the table below:
Source: Ministry of Finance; Reuters
Analysis and Comments: Open Data Albania (ODA)
* November 2010is the intittial date as long as Eurobond issued during this month
1. Data taken from the Ministry of Finance of Albania
2. The interest rate of 7.5% represent the cost of albanian government for this financial instrument during its durationt
3. Performance means in this case a way of estimating this instrument in financial markets