The risk premium on Armenia’s sovereign eurobonds has declined to about 170 basis points, Central Bank of Armenia Governor Martin Galstyan said at a press conference in response to a question from ARKA news agency.
Galstyan said the key issue now is whether that decline will prove durable. He warned that if future fiscal spending were to threaten Armenia’s fiscal space, the cost would not be limited to a higher policy rate from the central bank. It would also mean a higher country risk premium and a shift in investor expectations toward demanding higher returns for investing in Armenia.
“We need to understand how long-term this is and how sustainable it is. Is it because we are the most attractive destination for all investors in the world, or because there are fiscal problems and investors are seeking new places and new space at any cost?” he said.
What the central bank report says
In its third-quarter monetary policy report, the Central Bank said Armenia’s country risk premium continued to decline, reflecting the impact of both global factors and Armenia-specific drivers.
At the same time, the report says that while Armenia’s risk premium has broadly moved in line with trends across emerging markets, there are growing signs that the current low levels may increasingly reflect stronger fundamentals and factors specific to Armenia. Those include perceptions of lower security risks around the country. The report adds that as security risks gradually eased in 2025–2026, yields on Armenia’s foreign-currency bonds fell more sharply than for the broader emerging-market group.
In the first half of 2025, the gap between the spreads on Armenia’s foreign-currency bonds and those of emerging markets, measured against relatively risk-free benchmark assets, SOFR, averaged around 10 basis points. In other words, investors were on average demanding a higher premium to hold Armenia’s sovereign eurobonds than they were for emerging markets overall. From August 2025, that gap began to narrow and then turned negative, averaging about 60 basis points in August 2026.
The report also notes that short-term risk premiums in emerging markets have been pushed lower by abundant liquidity in the global economy and by stronger appetite for riskier assets. Against that backdrop, the main uncertainty is whether the trends now seen in emerging markets and in Armenia are long-term and fundamental in nature.
According to the central bank, that creates significant uncertainty when interpreting Armenia’s long-term sustainable country risk premium and the neutral interest rate. At the same time, improving fundamentals and stronger investor appetite for risk have supported sentiment toward emerging markets, while Armenia’s country risk premium has improved more than the overall group, likely reflecting reduced security risks.
