Conditions on Bulgaria’s domestic debt are deteriorating

The Ministry of Finance sold an additional €95.003 million worth of bonds on the domestic market. This is the result of the auction held on August 24, 2026 by the Bulgarian National Bank (BNB) for the sale of 10-year government securities. The Ministry of Finance’s initial plan was to issue bonds worth €150 million but ultimately it accepted orders for only 70% of the targeted amount.

The auction results show that the weighted-average yield achieved was 4.39%. A review of the Ministry of Finance’s statistics indicates that this is the highest yield for this issue compared to the previous two placements. In early February of this year the ministry sold €150 million at a weighted average yield of 3.84%. In April and May the ministry reopened the issue – once for €150 million and another time for €210 million. The weighted-average yields achieved at that time were 4.18% and 4.34%, respectively.

It is precisely this rising yield that likely prompted the Ministry of Finance to reject the remaining bids (totaling €253 million – a coverage ratio of 1.69). The data shows that non-competitive bids (in which buyers agree to the average price without bidding) amounted to just €16.9 million. The remaining bids totaling approximately €236 million were part of an actual auction where yields likely spiked dramatically forcing the Ministry of Finance to reject most of the bids.

In total since the beginning of the year the Ministry of Finance has placed €1.6 billion on the domestic market. With four months remaining until the end of this year the amount is already approaching the record set in 2025 (3.3 billion levs, or 1.69 billion euros). Furthermore the Radev government has already placed three foreign bond issues in early July, totaling 2.5 billion levs.

Rising debt, the “dwindling” free capital of institutional investors in Bulgaria, combined with rising interest rates by central banks (including the ECB) and a slowing economy, are among the reasons for the deteriorating conditions surrounding Bulgarian debt.

We note that the ceiling for new debt in 2026 is over €10 billion. The government will again seek the majority of the remaining planned borrowing on international markets.

Translated with DeepL.