Serbian Bonds Set for Boost in Latest Balkans Rating Upgrade
(Bloomberg) - Serbian government bonds are poised to extend this year's gains after its first-ever move into investment grade, in the latest credit rating win for the Balkan region over the past month.
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S&P Global Ratings raised its assessment of Serbia's foreign-currency bonds by one notch to BBB-, citing economic resilience against shocks as well as prudent fiscal and monetary policies. The move brought the Balkan nation's credit score out of junk issuer status and on par with neighboring Hungary and Romania, which are both members of the European Union that Serbia aspires to join.
The upgrade should help broaden the investor base for Serbian bonds, increase the market turnover and provide a boost for the government securities over the medium term, according to Mate Jelic, an analyst at Erste Group Bank AG's unit in Belgrade.
"Looking at price action year-to-date, we can conclude that the move was very much expected, especially on the longer end of the curve with Serbia already trading below Romania," Jelic said. "There might be more appeal on the shorter end of the curve for those who move fast."
Croatian Upgrades
The yield on Serbia's latest dollar-denominated issuance, a note maturing in 2034, has dropped 70 basis points from a June peak, with the premium over 10-year US Treasuries falling to an all-time low of 1.7 percentage points on Monday.
Serbia's foreign-currency bonds held mostly stable on Monday morning as investors take time to adjust their allocations for investment-grade debt, said Uros Bulovic, a senior broker at Raiffeisen Bank in Belgrade.
Serbia's ascent from junk issuer territory followed a pair of credit upgrades awarded to another former Yugoslav republic, Croatia, in September. Unlike Serbia, the Adriatic nation is benefiting from membership in the euro-area on top of improved fiscal stance and declining debt.
With Croatia now holding A- credit score from both Fitch Ratings and S&P, government officials in Zagreb hailed the upgrades as a reflection of their prudent fiscal management and economic policies in general.
"High credit rating levels are guarantors of financial security for all foreign and domestic investors," Finance Minister Marko Primorac said in an emailed response to Bloomberg questions following the recent rating upgrades. "We are convinced that will contribute to the growth of investment, production, and exports, as well as further increases in employment and wages.'
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