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Slovenia Becomes the Next Sovereign Debt Target as Yields Push Over 7%

“Cyprus may be a “special case” in the eyes of European officials, but their handling of its bailout is taking a toll on another small euro zone member with an over-burdened banking sector – Slovenia.

Yields on its two-year bonds surged to nearly 7 percent on Thursday, overtaking those on longer-dated paper and inverting the yield curve – a sign investors are pricing in a high risk of default.

Slovenia issued its first bond in 19 months in October and former Prime Minister Janez Jansa has said the country must sell another bond by June 6, when 907 million euros of 18-month treasury bills mature, to meet its financial obligations.

Contagion from Cyprus, which clinched a bailout deal on Monday at the expense of large bank depositors, has made that task more challenging and the prospect of a rescue more likely.

“One way or another things are coming to a head. June is a long way away for these guys now, so they need to do something,” said Tim Ash, head of emerging markets research ex-Africa at Standard Bank.

“It’s becoming increasingly likely they are going to have to begin to talk to the IMF and the Troika (about a bailout),” Ash said, referring to lenders including the International Monetary Fund, the European Union and European Central Bank.

The new government has so far declined to say anything about its borrowing plans, but it is expected to tap markets in coming months to repay some 2 billion euros of debt falling due in the middle of this year….”

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