Bulgaria's Finance Ministry is offering €2.25 billion (approximately $2.4 billion USD) in government securities today to address its widening budget deficit and refinance maturing debt. The auction includes 10-year Treasury bonds from issue No. BG 20 400 26 218, carrying an annual coupon rate of 3.5%. This issuance comes as the country faces a mounting budget shortfall, which reached an estimated €3.0 billion by late August, despite an €896.1 million grant from the European Union in July.
The country's fiscal situation has been under scrutiny, with the European Union initiating disciplinary proceedings due to Bulgaria's projected 2026 deficit of 4.1% of GDP, exceeding the 3% limit. Bulgaria has until October 15 to present a plan to the Council of the European Union to curb overspending. The latest bond issuance aims to manage these financial pressures, as rising outlays on state salaries, pensions, and municipal infrastructure have outstripped tax revenue.
Investor sentiment, however, appears favorable towards Eastern European sovereign bonds, including Bulgaria's. Analysts note an increasing interest in these markets due to an improving economic and fiscal backdrop, coupled with competitive yields that are harder to find in Western European counterparts. This trend is further supported by political regime changes and the region's growing adoption of the euro, which entails stringent economic requirements. On September 14, Bulgaria, Hungary, and Lithuania were highlighted as top picks for investors in Europe's sovereign bond markets.
Bulgaria has already issued €1.605 billion in new debt on the domestic market in 2026 and an additional €2.5 billion in international markets in July. The maximum amount of new government debt authorized for 2026 is €10.1 billion, including a potential €3.261 billion loan under the EU's Security Action for Europe (SAFE) instrument. Parliament recently approved raising the debt ceiling by €3.8 billion to finance the budget deficit and the National Recovery and Resilience Plan, pushing the maximum aggregate nominal amount of bonds under its medium-term program to €30.8 billion from €27 billion.
The average annual yield achieved at a recent auction for similar 10-year bonds was 4.39%, with a spread of 118 basis points over comparable German federal government bonds. Government debt is projected to reach €37.7 billion by year-end, equivalent to 30.1% of GDP. However, critics within the parliament have expressed concerns about the lack of detailed spending plans for the increased borrowing, with some arguing that the required amount was closer to €2.1 billion and that interest payments could reach €160 million annually.
