The Finance Ministry decided on Tuesday to put off its planned a seven-year bond issue, following the general unrest on global markets from Monday evening. Bond market sources say the decision to proceed with the issue as early as possible remains, but Tuesday’s difficult conjuncture had to be avoided.
In fact the market sell-off did not have the same impact on all countries’ bonds: The “safe havens” saw their yields decline because investors turned to them, while the debt of countries with problems suffered more pressure. Therefore the benchmark 10-year Greek bond saw its yield rise to 3.72 percent on Tuesday from 3.69 percent on Monday and 3.65 percent last Friday. The five-year bond yield rose to 2.93 percent from 2.87 percent on Monday and 2.79 percent on Friday.
Finland, Britain and Austria went ahead with their planned bond issues on Tuesday, while Greece, Belgium and five other countries played it safe and postponed theirs to avoid high borrowing costs.
Tuesday’s postponement illustrates the insecure market environment Greece will move into after the end of the bailout program in August. Given the weak position of its economy, as reflected in its “junk” credit status, Greece’s risks are far greater than those of other countries. That is why Greece’s creditors are seeking a safety net through a post-bailout framework of commitments and monitoring, against a so-called “clean exit.”
Bond market sources say the ministry’s plans have not changed – after all the Public Debt Management Agency had not officially declared the offers book open – and the issue will go ahead once the markets have calmed down.
The analysis of the Greek ministry, according to the same sources, argues that Monday’s Wall Street mini-crash was due to concerns about a rise in inflation, which would lead to an increase in bond yields and excessive growth in US stock prices. In order to turn to safer options, investors sold certain riskier securities, and in Greece’s case they capitalized on the 25 percent gains chalked up since November.