Consequently, it is not hard to judge how will existing return till maturity (year 2014) on Croatian euro-bond of 7,95% and on euro-denominated bonds of the Republic of Croatia of 6,34% affect local economy and business and investment climate. Both figures are highest in recent several years. Not sure about this? Then maybe bond and bonds glossary could help with basics.
The newest case is Croatian government bonds issue in May 2009. Here is how Croatian Ministry of Finances prepared for this issue and related events. We quote from official web site: "Croatian Finance Minister Ivan Suker said on Tuesday that he would visit five or six international stock markets next week to present government bonds to possible investors." Enough? I don't think so.
"Next week, we will go on a road show during which we will visit five to six stock markets and present to investors Croatia's economic and monetary policy, and everything else we could attract investors with," Suker said at a news conference the Croatian Reconstruction and Development Bank (HBOR) held to present measures designed to alleviate the effects of the global economic crisis on the national economy.
But wait, there's more: Suker said that the value of the government bonds to be presented next week was EUR 750 million. Now we know this was more than successful. However, it is still arguable whether it will be enough or new issue will be done by the end of this year - of course, to cover for the funds missing in Croatia state budget. Somehow we believe we will see more of this and with even higher interest paid - no ifs, ands or buts about it.
It was not hard to guess and here is why: "(Suker) would not comment on media reports that the government could opt for another issue of euro-bonds in the autumn, or on the possibility of a new budget revision." And just to reiterate, if you read between the lines. "What will happen in the autumn will depend on what the situation will be like then," the minister said. Asked how the budget had been filled in the first four months of this year, Suker said that "revenues were 4-5 percent below last year's budget execution".
What was happening before with Croatian bonds and how about its track-record? Few representative examples follow.
Year 2009:
"Investment service Moody reduced its estimate for Croatian bonds to the level close to the junk territory. Moody estimated that Croatian government reacted slowly and probably inadequately to the worsened financial situation and increased budget gap." How good is to issue new bonds in this situation, it is not ours to say.
Year 2007:
"(Croatia) issued ten-year bonds ... Interest paid on these bonds is 4,75% yearly ... paid bi-annually.
Year 2002:
"This issue of bonds (of the Republic of Croatia) matures in May 2012 ... interest paid is 6,875% yearly ... paid bi-annually. As for the first issue, ... euro-denominated bonds will be paid on maturity, with interest in kunas ..."
Year 1997:
"(Croatia) issued its first dollar bond with maturity date in February 2002 ... fixed coupon of 7%. However, this issue was closed with great oversubscription."
Year 1996:
"The official debut of Croatian bond (denominated in kunas) was in December 1996 with maturity in December 1998 and a 12.5% coupon rate."
Well, what to say? Instead of a close we use old "historia magistra vitae est" and hope for the best.
Some of the bond investment funds in its portfolio have also Croatian bonds (bonds of the Republic or Croatia) but also several types of mortgage bonds. There is not much to discover about bonds in Croatia so here we just want to shed some light on fixed income instruments and investments in general. Sure, that primarily means Croatian government bonds.