Cyprus bond markets are back in focus today as the Republic moves ahead with a new 10-year bond issuance, targeting around €1 billion, with the primary objective of refinancing existing debt rather than increasing overall borrowing.
Focus on refinancing, not expanding borrowing
According to information from Economy Today, the main purpose of the market return is the repayment of the five-year bond issued in 2021, which matures on February 9, 2026. There is no intention to significantly increase total public borrowing, in line with strict guidance from the Ministry of Finance.
Clear instructions have been issued from senior levels within the Ministry that the size of the issuance should not exceed the amount required to repay the maturing debt. Any additional financing needs, as well as the servicing of existing public debt, are expected to be covered through fiscal surpluses, as set out in the government’s broader debt management strategy.
Debt targets underpin the strategy
During discussions on the state budget, Finance Minister Makis Keravnos underlined that the target is for public debt to fall close to 50% of GDP in 2026, specifically to 50.6%. This follows a reduction to 55.3% of GDP at the end of 2025, highlighting the steady improvement in Cyprus’s fiscal position.
The controlled approach to borrowing reflects the authorities’ determination to maintain fiscal discipline, even amid favourable market conditions.
A cautious return after a year away
Cyprus last accessed international markets in June 2024 with the issuance of a seven-year bond worth €1 billion. Throughout 2025, international markets were deliberately excluded from the Republic’s financing plans, despite positive credit assessments and strong economic performance recorded by international rating agencies.
This makes today’s move a carefully timed return, rather than a shift in overall financing policy.
Cost of borrowing remains the key unknown
At this stage, the cost of the new 10-year bond remains unclear. However, market estimates suggest that borrowing terms could be the most favourable of the past decade, given that the Cypriot economy now holds an A investment-grade rating from all four major credit rating agencies, as well as Scope Ratings.
Sources with long-standing involvement in Cyprus’s financing operations expect investor demand to be multiple times higher than the targeted €1 billion. The key questions now centre on whether a new record-low interest rate will be achieved and whether the authorities will adhere strictly to the €1 billion target or opt to raise several hundred million euros more than initially planned.
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