Bloomberg: Low Public Debt, Plans to Cut Budget Gap Help Bulgarian Bonds

With its public-debt levels among the lowest in the EU and government pledges to cut the budget deficit "Bulgaria has been partly shielded" from the sharp drop in stock and bond prices on global markets this week, Bloomberg reported on Wednesday.

Commenting on the potential impact of a Greek default on Bulgaria, Dmitri Barinov, a money manager at Union Investment Privatfonds GmbH in Frankfurt, has told the newswire: "The risks for Bulgaria aren't negligible, but I see them as being well contained."

His comment followed a report by Morgan Stanley Research analysts, who said earlier this week that Bulgaria is potentially exposed to a Grexit contagion more than its neighbors in Southeast Europe. With Greek banks consituting a substantial part of foreign claims in Bulgaria, Romania and Serbia  "we think that the banks are by far the most serious potential channel of contagion", Morgan Stanley analysts said. According to the report, Bulgaria, Romania and Serbia may have to counter "large deposit outflows" from the units of Greek banks if Greece defaults and leaves the eurozone.

However, local regulations mean that "the Greek parent can't simply take cash out at will," Bloomberg quoted Richard Segal, head of emerging-market strategy at Jefferies in London, as saying.

Bloomberg also quoted the opinion of Regis Chatellier, a London-based director of emerging-market credit strategy at Societe Generale, who said that while Greece's exit from the eurozone could put banks in Bulgaria and Romania "somewhat under pressure," the EU and the ECB would implement some measures to prevent contagion.

You can read the full article "Greek Euro Exit Risk Gets You Down? Find Relief in Bulgaria Debt" by Bloomberg here.