Bond issue on track this week

Despite more relaxed official statements, the Finance Ministry is gearing up for return to the markets By Sotiris Nikas

Athens will issue its first bonds in four years later this week and will only sell them to foreign investors, sources have suggested.

There has been some confusion in the market over whether the government would be proceeding with the issue following statements by Finance Minister Yannis Stournaras on Monday in which he said that Greece is in no rush to return to the markets before Easter. The ministry also announced that “the return to the markets will take place within the first half of the year, as planned,” adding to the confusion.

However, it is believed that Monday’s statements were intended to the muddy the waters and that the government is set on proceeding as planned with issuing bonds either tomorrow or on Thursday.

Sources say that the plan provides for a bond issue directed only at foreigners for two main reasons. The first is that the issue should send a clear message that those who turned their back on Greece in April 2010 are now placing their trust back in the country as it gradually emerges from the bailout process. Moreover, no one wants the idea to spread that the new bond issue was supported by domestic funds.

Stournaras, meanwhile, said on Monday that the return to the markets “means that Greece, after four years of being cut off and unable to borrow, will slowly start to test the waters for a return similar to the way other countries such as Portugal and Ireland emerged from the bailout process.”

The second reason is that the country’s creditors, and particularly the European Central Bank, have asked that Greek banks do not use the mechanism of the new bond to draw more liquidity from the Eurosystem while also using the ECB’s mechanism for the same purpose.

The main scenario for the new bonds remains that it will be a five-year issue, with Public Debt Management Agency (PDMA) likely starting its book-building process tomorrow and ending it on Thursday, although the dates remain uncertain. The amount to be borrowed will be at least 2 billion euros.