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Greece returning to bond markets after four years in wilderness

Almost four years to the day since it issued its last sovereign bond, Greece will return to international markets with a five-year note on Thursday, seeking to tap investors for 2.5 billion euros that the Greek government argues will help bring down its short-term borrowing costs as well.

The Finance Ministry confirmed on Wednesday afternoon that the book building would happen on Thursday and that a number of international banks (Bank of America, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan and Morgan Stanley) had been mandated. The bond is to be issued under UK, rather than Greek, law.

Sources said late on Wednesday that the bond would be comfortably oversubscribed, with the final order book stretching to well over 13 billion euros. The yield is expected to reach between 5 and 5.25 percent. Greek Finance Ministry sources said that Athens would be happy with an interest rate below 5.3 percent. On Wednesday, the yield on Greece’s 10-year bonds fell below 6 percent for the first time since 2010.

“The fact that there is major interest leads to the belief that the interest rate will be low but it also shows that markets view the discussion about [Greek] debt sustainability in different terms,” a Finance Ministry official who wished to remain anonymous told Kathimerini.

The government believes that apart from the strong message the bond issue will send about Greek prospects, it will also save about 200 million euros per year in short-term borrowing costs by helping to bring down the yield for T-bills. These projected savings, however, will have to be offset against some 500 million euros in interest that Greece is due to pay to investors who buy the bond.

The government will be looking to build on Greece’s return to the market as it gears up for the May local and European Parliament elections.

“This is an important step in Greece’s effort to fully exit the crisis,” government spokesman Simos Kedikoglou told The Associated Press.

He also criticized SYRIZA leader Alexis Tsipras for arguing that the return to the markets was politically driven. “Mr Tsipras wants us to remain in the [EU-IMF] memorandum so he has a reason to exist,” said Kedikoglou. “He wants to wallow in his misery. We will leave him to it.”

The news of the impending bond issue fueled an angry reaction from opposition parties. Leftist SYRIZA spokesman Panos Skourletis referred to a “staged, expensive return to the markets for pre-election reasons” in comments to Sto Kokkino radio, which is affiliated with the leftist party.

In comments to Alpha Radio, prominent SYRIZA lawmaker Dimitris Papadimoulis claimed that the planned foray into international markets would increase Greece’s debt and burden the country’s taxpayers with an additional 500 million euros in interest over the next five years.

Democratic Left (DIMAR), which used to be the government’s third coalition partner until last June when it quit over Samaras’s abrupt decision to shut down state broadcaster ERT, also questioned the timing of the bond issue, saying that the move was “rushed and serves pre-election priorities.” “The return to the markets should not be subject to public relations exercises but part of a clear and comprehensive strategic management of debt to ensure that refinancing interest rates do not increase.”

ekathimerini.com , Wednesday April 9, 2014 (20:38)  
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