Greece is expected to make its first market foray for 2022 on Wednesday with a 10-year bond issue, barring any unforeseeable circumstances.
The Public Debt Management Agency on Tuesday requested that six banks (Barclays, Commerzbank, Eurobank, Morgan Stanley, Nomura and Societe Generale) be the book runners of the issue that is aimed to draw some 3-3.5 billion euros, according to bank sources. That will also depend on demand.
The recent pressure on Greek bonds, as is the case internationally, prevented the issue of a Greek bond earlier this month, but the Finance Ministry is not worried as long as yields do not exceed 3 percentage points, that is the average long-term cost of borrowing based on the creditors’ debt sustainability analysis. After all, the rating agencies have forecast that 2022 will be a year of borrowing cost increases around the world due to the rise in inflation and the shift in monetary policies. That was also proven by recent forays by Italy, Spain and Portugal, which were forced to offer a higher yield.
Notably, the first bond issues of several countries have shown this year that the offers book may be smaller than in 2021, but demand remains strong.
According to market experts, the choice of a 10-year bond is a typical and safe curtain-raiser for the year, in the way the PDMA tends to do in recent years. That is also the duration of the issue forecast by the analysts of Citibank, JPMorgan, Danske Bank and DZ Bank.
The 10-year paper issued in January 2021, maturing in June 2031, had a historically low interest rate of 0.807% and a coupon of 0.75%, with its reopening last summer leading to a yield of 0.88%. Its yield on Tuesday stood at 1.63%, which means the new bond on Wednesday that will actually mature after 10.5 years, in June 2032, will likely have a yield more than twice last year’s.
Banking sources say that the yield of the new benchmark issue will come to about 130 basis points above mid-swap, plus the new-issue premium, taking the final interest rate to between 1.75% and 1.8%.
The new issue is expected to command high demand, as DZ Bank analyst Sebastian Fellechner noted to Kathimerini that Greece offers the most attractive yields in the Eurozone and has a far smaller political risk than other countries.