Greece is making its first market foray for 2021, probably on Wednesday, with the issue of a new 10-year bond to further strengthen its cash reserves. The market had more or less expected a 10-year note, despite some investment companies foreseeing longer issues.
The decision for a benchmark issue is neither by chance nor hasty, with the Public Debt Management Agency weighing developments in the bond market, the mood of investors and the recommendations of primary dealers.
The fact that the Italian political crisis has not affected Greek yields in the last few days and hasn’t quenched investors’ thirst for high returns, combined with the positive course of Italian bonds, has convinced the Greek state to make its move now, in line with its planning.
Last week’s bond swap with Greek systemic lenders through the re-issue of the 30-year bond at a historically low interest rate also assisted the Public Debt Management Agency in its decision, as that was a strong signal to the markets that Greece has no financing or liquidity problems.
The new 10-year paper will mature in 2031, with six investment banks undertaking the issue: They are Barclays, Citi, Deutsche Bank, Morgan Stanley, Nomura and Greece’s Eurobank. Although the PDMA did not announce in its bourse filing yesterday how much cash it intends to raise, market sources speak of 2.5-3 billion euros, while the interest rate is expected to be well below 0.8%, marking a new historic low for Greece’s cost of funding.
Danske Bank chief analyst Jens Peter Sorensen, who had correctly predicted Greece would opt for a 10-year paper first, told Kathimerini that the Italian problems had a very limited impact on Greece, as the spread of the Greek bond yield against that of the German bund widened by just one basis point over the past week.
He added that a significant bond payout is due by Spain this week, which will add to the liquidity of the market, while the coincidence of the Fitch report that affirmed Greece’s outlook as stable was not lost on him either. This is why this is a very good window for Greece, he commented, expecting the yield to be attractive.