Barring any unforeseen circumstances, Greece will go ahead with a new bond issue on Wednesday to ensure the state has the necessary cash available to fulfill its August obligations of 6.7 billion euros while also normalizing the country’s image in the bond market.
Sources say that the Finance Ministry is most likely to issue three-year bonds – which do not currently exist in the country’s bond market – and to borrow an amount of between 2.5 and 3 billion euros.
Market analysts say that if Greece proceeds with such a move it should secure an interest rate that will not exceed 3 percent, and possibly even smaller. This would be a particularly favorable result, which would push the rate of the treasury bills lower and reduce budget spending on interest rate payments.
Ministry officials appear firm that Wednesday is the best day for the book-building process to start so that it can be concluded tomorrow. There will likely be six investment firms running the process, including some of the following: Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, Citi, JPMorgan, Morgan Stanley, Nomura, HSBC, UBS and BNP Paribas.
Wednesday appears to be ideal for the start of the issue process for several reasons: Conditions in the money markets remain good thanks to the maintenance of interest rates at low levels, as Tuesday’s treasury bills sale also showed; Monday’s Eurogroup decision for the disbursement of the 1-billion-euros sub-tranche confirmed that Greece has returned to the path of reforms; and OTE telecom borrowed 700 million euros through a six-year bond with a coupon of 3.50 percent on Monday, while Greece had secured a rate of 4.75 percent for its five-year bonds in April.
Crucially, the intermediary inspection of the country’s creditors will start on Thursday, as Finance Minister Gikas Hardouvelis holds his first meeting with the heads of the creditors’ missions to Athens, so the issue will be over and done with before any negative developments in the talks might emerge.