By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 28 April 2026 with Stelios Leonidou, Senior Economic Officer at the Cypriot Public Debt Management Office.

Q: Mr. Leonidou, you issued a €1 billion 10-year benchmark bond in January. How would you assess the outcome of this transaction in terms of demand, pricing, and investor participation?

A: It was a very successful issuance. We saw record investor participation, and the spreads we achieved—both versus mid-swaps and German Bunds—were historically low. There was extremely strong investor interest, and we priced at levels we hadn’t been able to achieve in the past.

Q: Cyprus did not issue any benchmark bonds in 2025. Following your return this year, should markets expect further benchmark issuance in 2026?

A: Our current plan is not to issue another benchmark in 2026. However, given the global situation, we are still assessing potential economic impacts. It’s possible that additional financing may be needed. We expect to have more clarity by the summer when we review our funding program with updated economic data.

Q: When you say additional financing, what kind of transactions are you considering?

A: It depends on the size. For amounts between €500 million and €1 billion, we would likely issue a new benchmark. For smaller amounts—€100 million to €250 million—we might consider domestic market issuance, taps, or private placements.

Q: What would drive the choice between these options?

A: Primarily relative costs and investor demand.

Q: How should investors think about Cyprus’s market presence going forward—more regular issuance or a largely opportunistic approach?

A: With the exception of 2025, we have been consistently active in the market since 2014. Investors should view 2025 as the exception. Going forward, we expect to remain active annually, with at least one issuance, and potentially one or two transactions totaling around €2–2.5 billion depending on funding needs.

Q: Is there scope to pre-fund part of your 2027 financing needs this year?

A: Yes, there is scope, depending on interest rate developments and market opportunities. This will also depend on any additional funding needs for 2026. We expect to have a clearer view by the summer.

Q: Would you consider accelerating issuance if market conditions became particularly favorable?

A: Not necessarily. Favorable conditions would likely reflect broader economic normalization, which would also reduce our funding needs. Given our relatively small funding requirements, accelerating issuance now could limit our ability to access markets in 2027. Maintaining a consistent annual presence is more important for us.

Q: How are recent geopolitical developments, particularly in the Middle East, influencing your view on yields and issuance timing?

A: Markets generally expect higher interest rates, possibly as early as the second half of 2026, driven by persistent inflation and ongoing geopolitical tensions. While this may affect timing within the year, it does not change our overall strategy of one or two issuances annually.

Q: How might this affect the maturities you choose?

A: Higher rates make longer-term issuance more costly, but this is not our primary consideration. If we decide to issue long-term bonds (beyond 10 years), the decision will not be driven solely by current rate levels.

Q: If you issue another benchmark this year, would it likely be under 10 years?

A: Not necessarily. It could be a tap of the current 10-year bond or a longer maturity. One of our strategic objectives is to extend the maturity profile, as we are seeing some shortening in our debt maturity structure.

Q: How far along the curve would you be willing to go?

A: As a first step, we would look at 15–20 years, and potentially longer maturities later on.

Q: How sensitive is your funding strategy to changes in ECB policy expectations or market volatility?

A: There is sensitivity, as higher costs must be considered. However, this is not the primary driver. Our main concern is avoiding a concentration of maturities in a short time frame. Interest rates influence decisions, but they are not the sole factor.

Q: Have foreign exchange market developments affected your thinking on foreign currency issuance?

A: Not directly, but they have reduced our appetite for taking additional risk. For now, any plans for foreign currency issuance are on hold until the global environment stabilizes.

Q: Do you still see a role for non-euro issuance in the medium term?

A: Yes, mainly for diversification and access to other markets. However, euro funding has been very successful, and the European market sufficiently covers our needs.

Q: If you were to issue in foreign currency, which currencies would you consider?

A: The first option would likely be US dollars, given the size and liquidity of the market, and its appeal to Asian and Middle Eastern investors. That said, we have not explored this in detail yet.

Q: Are liability management operations, such as bond switches, part of your 2026 strategy?

A: They remain part of our broader strategy, but we currently see no scope for them in 2026. Such operations must align with our maturity objectives and make fiscal sense. At present, market conditions do not support this, though 2027 may offer opportunities.

Q: What about issuing a sustainability bond?

A: This is not part of our current strategy for 2026 or 2027. While there is demand, we are not actively considering it at this stage.

Q: Expanding and diversifying the investor base is a key objective in your 2026–2028 strategy. Which geographies are you targeting?

A: Initially, we were focusing on the Middle East and Asia. However, geopolitical developments have paused our Middle East strategy. Asia remains a key area of interest, as our presence there is limited. The US is also important, though many US investors access us via UK affiliates.

Q: What steps are you taking to attract new international investors?

A: We aim to increase transparency and visibility for Cyprus as an issuer. We work closely with partner banks to connect with new investors and organize targeted roadshows. For example, recent outreach to new European markets successfully generated additional demand.

Q: How do you see Cyprus positioned relative to other peripheral sovereign issuers?

A: We are in a very strong position. Over the past four to five years, Cyprus has demonstrated solid macroeconomic and fiscal performance, including significant debt reduction, fiscal surpluses, and continuous rating improvements. Despite challenges such as COVID-19 and the Russia-Ukraine war, the economy has remained resilient and continued to grow.