Loan Rates Woes Persist in Bulgaria despite Euro Float

Bulgarians taking out loans to buy property had to dig deeper in their pockets to pay them off last month despite the government's promises and the country's successful comeback on international markets.

The interest rate on consumer loans in levs increased in June to 11.46% - 0.25 percentage points, while the euro went up to 9.61%.

For residential loans the interest rates stood at 7.51% and 7.58% respectively.

Ten years after Bulgaria last appeared on the international capital market, the country made a successful comeback this summer. The government and the central bank were both hopeful that this will push down loans interest rates.

Bulgaria tapped at the beginning of July international markets to raise funds to repay the first tranche of about EUR 835 M (USD 1.07 B) in 11-year eurobonds maturing on January 15, 2013. The next tranche however is due in 2015 and Sofia may be forced to go to the markets again, analysts say.

A week ahead of the Eurobond issue, Bulgaria's finance minister Simeon Djankov and central bank deputy governor Kalin Hristov launched a series of investor meetings across Europe, including some of the major players on the debt market.

A quarter of the bonds were purchased by British financial institutions, followed by those from Germany - 17%, according to data by the finance ministry.

Nine percent were acquired by Asian investors. Almost fifty percent of the bonds in the new issue went into the hands of investment funds, while 6% - at central banks.

Interestingly, the bond issue will mature in the summer of 2017, when the country will hold general parliamentary elections. But experts say this is just a coincidence, not a deliberately sought result.

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