Friday, October 11 2019 16:54
Naira Badalian

Result exceeded expectations! Arshaluys Margaryan tells how Armenian financial authorities promoted Armenian Eurobonds in international markets

Result exceeded expectations! Arshaluys Margaryan tells how Armenian financial authorities promoted Armenian Eurobonds in international markets

ArmInfo. In September 2019, Armenia announced the issue of 10-year Eurobonds worth $ 500 million in international markets. Meanwhile, the bids for the purchase of Armenian sovereign bonds in international markets amounted to $ 2.8 billion. “It was unexpected even for me,” Head of the Public Debt Management Department of the Ministry of Finance of Armenia Arshaluys Margaryan stated in an interview with ArmInfo.


- Mr. Margaryan, Armenia's financial authorities over the recent two years have repeatedly stated that the third tranche of Armenian Eurobonds is just around the corner. Indeed, according to the schedule of repayment of government debt until 2054, 2020 and 2025 are the peak years in servicing the public debt, when in both cases about $ 500 million will have to be paid to pay off the first tranche of Eurobonds. On the basis of these very calculations the experts forecasted the issue before / or in 2020 - before the next payment on the first tranche, which is scheduled for September 30, 2020. So, why this happened now?


The stars have aligned (smiling). Well, seriously, right now the situation is rather favorable on the financial markets from point of view of managing public debt. Thus, on Armenia's domestic market significant steps have been made for increasing borrowings attracted from internal sources. And if 4-5 years ago the share of domestic public debt amounted to 4-5% of the total amount of Armenia's state debt, year over year, by gradually increasing financing of state budget's deficit at the expense of domestic resources we have reached the figure of about 20%. That is, we have realized its growth potential, as well as the fact that without increasing the domestic debt we exacerbate existing negative expectations related to state debt considering the huge share of the external debt exceeding 90%.


And we managed to achieve this also due to consolidation of banks, development of insurance market, investment companies, introduction of pension reform and entry into the market of relevant management funds. New players appeared on the market, who have reduced the significant dependence of the public debt management system on banking system. There was time, when our debt was fully in the hands of the commercial banks.  Currently we consistently bring into life my long-cherished dream of reducing the share of banks in the domestic public debt to 15-20% in accordance with the best European standards. As of today, according to our estimates the real share of resident banks is less than 60%.


For instance, on July 9 Armenia announced placement of 10-year bonds in an unprecedented volume- 100 mln USD. The demand on securities exceeded 200 mln USD. It is planned to issue 10 year bonds in the volume of 150-200 mln USD in a year considering that large players are attracted by large placements. On October 8 we have placed 30 year state bonds in the volume of 24 bln AMD, however with 10.9% interest rate (versus previous 11.64%) the demand totaled 63 bln AMD. Even many of large players on the market do not have issue of 30 year bonds to boast of.


At the same time the issue of state bonds is a kind of guiding light, benchmark for private sector inside the country. Recently we more often see that private companies in Armenia issue bonds. Recently, Zangezur Copper Molybdenum Combine (CJSC), the largest mine development company in Armenia, proceeded with open placement of corporate bonds. This indicates that the company has long term plans with the state as well as a desire to reduce dependence on bank institutions using the instruments of the modern financial market.


As for the favorable conditions on the external market I can tell that a tendency of “cheapening” money is being observed worldwide aimed at the activation of economies. In particular, the USA, Europe, Japan and China consistently reduce interest rates.

If the conditions were so favorable, a logical question arises: why was the amount set at 500 mln USD and not 700-800 mln USD?


Once we at the Ministry of Finance even considered the possibility of redeeming the two issues on Eurobonds and placement of two bonds- ten year and fifteen-year ones. However, after long discussions we have realized that this will turn out to be more expensive. In fact if we asked more on the international market we could make an impression that we are in a great need of money and then these bonds would cost more for the country.



As a result precise calculations have been made. On September 19 when the announcement was made on placing 10 year Eurobonds by Armenia, a country with a “Ba3” Moody's sovereign rating, the issue organizer started book-building in the amount of 500 mln USD with an initial yield of 4.625% annually. A tangible prevalence of demand over offer more than 5-fold l has led to reduction of yield rate to 4.2% y-o-y and coupon rate totaled 3.95%.  J.P. Morgan Securities plc. and City bank acted as main underwriters. Already on September 20, 21 and 22, countries with an investment rating of BBB entered the market, but the yield on their bonds was more than 50 basis points higher than that of Armenian Eurobonds. Even I did not expect such a result.



Obviously, the day of entering the market plays a role, but it is more important who presents the country on the road show, this time Finance Minister Atom Janjughazyan, Deputy Chairman of Central Bank Nerses Yeritsyan and Deputy Head of the Department of State Debt Management of Finance Ministry Samvel Khanvelyan were present. Based on, among other things, achievements on government bonds, when asked why $ 500 million, and not more, they said they were able to attract resources within the country. It was important for external players to understand that we were raising these funds to pay off our obligations on Eurobonds, and not for other budgetary purposes.


Using these funds, we have already redeemed our obligations for the first tranche in the amount of $ 402 mln, and sent $ 98 million to the Stabilization Deposit Fund.


The brand of the “Armenian velvet revolution”, our representatives on the road show - “Janjughazyan - Yeritsyan - Khanvelyan” were able to present Armenia in such a way that the richest people in the world stood in line for Armenian sovereign bonds. I was beside myself with pride, proud of the result that we were able to achieve with our small team.


- And how is Armenia going to pay the second tranche of Eurobonds in 2025?


As the development of events shows, we were able to choose the best time and partners for entering the international financial market, thanks to which we actually attracted very cheap money. So, expect good news soon.

Input digits     


Exchange rates

Search by date

Government Bonds

Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

Volume of satisfied bids

200 million

Yield at cut-off price


Maximum yield


Мinimum yield


Weighted average yield


Number of participants


The maturity date of T-bills




СПРОС (Покупка)


Средневзв. Цена




Средневзв. Цена




Цена откр.


Цена закр.


Мин. Цена


Макс. Цена


Ср/взв. Цена



Кол-во сделок


Объем (инвал.)

200 000

0бъем (драм)

96 400 000