The buyback process for Greek state bonds began officially on Monday on better terms than expected, with the government well aware that its outcome will determine whether Greece manages to secure the disbursement of 34.4 billion euros in bailout funds on December 13.
The price range at which the state will buy back its bonds is higher than what the markets had anticipated, as it stands about 4 to 10 percent above November 23 prices, which were originally thought to be the yardstick. The Dutch auction method chosen sets a minimum price for bonds and means that the state will pay the same amount to all bidders at the price of the highest bid, a measure which will be good for Greek banks, which will also participate.
The Public Debt Management Agency (PDMA) announced on Monday that the country will have 10 billion euros at its disposal for the program from the European Financial Stability Facility (EFSF), with offers from private bondholders to be accepted up until 7 p.m. on Friday.
However, as the text of the invitation states, Greece reserves the right to stop the program when it sees fit, or extend it or even cancel it altogether. The most likely of the three is an extension if that is considered useful to cover the interest by bondholders.
As things stand, the arrangement date is December 17, but what is certain is that Pthe DMA maintains the right to accept any offers it considers as the best for Greece and the effort to reduce its debt, regardless of what private bondholders offer.
The total amount of bonds for the buyback stands at 61.4 billion euros. The PDMA will conduct 20 different auctions, as many as the number of bonds in question.
The market’s response to the invitation of interest was favorable. Foreign analysts told Kathimerini that the terms of the proposal are good, and this was also reflected in the spread between the Greek 10-year bond and the benchmark 10-year German bund, that was reduced by about 150 basis points yesterday compared with last Friday. The Royal Bank of Scotland recommended that investors participate in the Greek bond buyback program, while the Financial Times cited Greek bankers saying that the minimum price set will bring the desired result.