YEREVAN, September 16. /ARKA/. The risk premium on Armenian Eurobonds has decreased to approximately 170 bps, Central Bank Governor Martin Galstyan stated yesterday at a press conference, responding to a question from ARKA news agency.
According to Galstyan, given the forward-looking approach, if fiscal expenditures arise in the future that threaten Armenia’s fiscal space, the price will be not only a higher interest rate from the Central Bank, but also an increase in the country risk premium, as well as the dynamics of investor expectations regarding higher interest rates for investing in Armenia.
“We must understand how long-term this (risk premium reduction – ed.) is and how sustainable it is. “Is this because we are the most attractive destination for investors worldwide, or because there are fiscal challenges and investors are seeking new places and new spaces at any cost?” he said.
Regarding the Risk Premium
The Central Bank’s Q3 Monetary Policy Report notes that Armenia’s country risk premium continued to decline, reflecting the influence of both global and Armenia-specific factors.
At the same time, while Armenia’s risk premium dynamics have followed the general trends of emerging markets, there are gradually growing signals that the current low levels of Armenia’s risk premium may primarily reflect improved fundamentals and the influence of Armenia-specific factors, including those related to the perception of declining security risks around Armenia. With security risks gradually easing over 2025–2026, yields on Armenia’s foreign currency bonds have declined more sharply than those of the emerging market group as a whole.
Thus, in the first half of 2025, the spread between Armenian and emerging market foreign currency bonds relative to relatively risk-free benchmarks (SOFR) averaged about 10 bps, meaning investors, on average, demanded a higher premium for investing in Armenian government Eurobonds compared to the emerging market group as a whole. Since August 2025, this gap has begun to narrow and has become negative, averaging about 60 bps in August 2026.
The report notes that the decline in short-term risk premiums for emerging markets is facilitated by high liquidity in the global economy and, in general, an increased propensity to invest in riskier assets. In this context, the main uncertainties relate to the extent to which current trends observed in emerging markets, including Armenia, are long-term and fundamental. This, in turn, creates significant uncertainty in terms of interpreting the long-term, sustainable level of Armenia’s country risk premium and the neutral interest rate.
Amid rising risk appetite and improving fundamentals, investor sentiment toward emerging markets has improved. Armenia’s country risk premium has improved more than that of emerging markets overall, likely reflecting a weakening of security risks.
