Seven-year bond by November

Gov’t plans for another debt issue to ensure cash flow regardless of whether loan tranches come through By Sotiris Nikas

The government intends to go ahead with the issue of a new, seven-year bond as well as shorter-term papers that will allow Athens to enhance the Greek bond range and draw 3 to 4 billion euros by the end of the year.

A senior Finance Ministry official said on Wednesday in Paris that Greece is expected to tap the markets with seven-year bonds by the end of 2014, as conditions are good and the country has regained the confidence of investors.

Regarding the funding gap foreseen in the next 12 months, the same official noted that Athens is no longer worried as the problem was solved after Greece returned to the markets. He added that the first time the country tapped the market this year, in April, was the turning point regarding investors’ perceptions of the Greek economy.

The ministry has already drafted an action plan with a clear timetable, which starts next week with the reissuing of this year’s three- and five-year bonds to replace some of the three- and six-month treasury bills worth between 1 and 1.5 billion euros. This will allow Greek banks to purchase new Greek bonds and start getting active in the secondary bond market, thereby supporting Greek bonds.

In the next few weeks the state will proceed with a new issue of 18-month T-bills, as the Finance Ministry has identified strong interest among investors. This will be followed by the issue of a new seven-year bond, likely by mid-November. This issue will secure the state’s cash flow, even in the worst-case scenario of inconclusive negotiations with the country’s creditors this fall and the International Monetary Fund postponing the disbursement of a loan tranche.

With the issue of a seven-year bond added to the three- and five-year papers, Greece will have completed the range of short- and medium-term bonds in its market, so that the next step will be the issue of a new 10-year bond, though not within 2014.

Of course all this planning hinges on the condition there will be no deterioration in the country’s financial conditions, either through the negotiations with its creditors or negative developments in Europe.