Monday Jul 28, 2014 Search
Weather | Athens
31o C
23o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Greek yields dip as yield-starved investors eye three-year bond

By Marius Zaharia

Greek yields dipped on Thursday as the aid recipient readied an issue of three-year bonds in its second debt sale since its default, taking advantage of a European Central Bank promise to make long-term loans to banks.

The sale is expected to raise 3 billion euros and follows a five-year bond sale in April, which marked one of the fastest market comebacks by a sovereign following a debt restructuring.

It is also signalling Greece's gradual emergence from a debt crisis that started in 2010 and spread to other countries in the euro zone at its peak in 2011 and 2012, when Athens imposed heavy losses on private bondholders.

Although Greece is expected to come out of a six-year recession in 2014 and is running a budget surplus excluding interest rate payments, the renewed interest for its bonds has a more powerful force behind it.

The ECB's ultra-easy monetary policy has pinned yields on top-rated bonds at record lows and pushed investors towards riskier assets to maximize returns.

The central bank's latest plans to offer up to 1 trillion euros to banks in four-year loans at a rate of 0.25 percent from September makes high-yielding short-term debt particularly attractive. Banks can buy such debt with the ECB money and benefit from the rate differential.

"The new issue should see plenty of demand, and order books could easily rise to double digits," said Jan von Gerich, chief fixed income strategist at Nordea in Helsinki.

Greek 10-year yields fell 2 basis points to 6.09 percent, while five-year yields were flat at 4.25 percent. Both yields have risen in recent days as investors made room in their books for the new paper.

The initial guidance sees the bond yielding between 3.50 and 3.625 percent. Commerzbank strategists said the bond could eventually be sold for as little as 3.25 percent.

That was still higher than yields on all 10-year euro zone bonds apart from Portugal's and Slovenia's. Investors in Italian debt, for example, would have to buy a 15-year bond to get a higher yield than Greece's three-year paper. German 30-year paper offered 2.16 percent.

Greece sold its five-year bond at 4.95 percent and the strong performance in the market following its issuance was another incentive for investors to snap up the three-year paper.

"It looks like a free lunch," one trader said.

Caveat

The new bond comes with a caveat. One of the most attractive features of Greek debt before this sale was that the country had no debt to pay back for the next five years, hence no near-term financing risk.

In the next three years, Greece would have to decide which path to take after the end of its second bailout deal with the International Monetary Fund and the European Union. It will also have to hold elections in 2016, or earlier if the fragile ruling coalition loses even more strength.

Anti-bailout leftist party SYRIZAdid well in the May European Parliament elections and is expected to retain its support from a population deeply hurt by austerity. Bondholders prefer the predictability of a pro-bailout government.

"Of course the markets are looking at the redemption profile and at some point this could become an issue," said Rainer Guntermann, rate strategist at Commerzbank.

"But for now, yield levels in these smaller peripheral countries like Greece look attractive and you don't have many alternatives." [Reuters]

ekathimerini.com , Thursday Jul 10, 2014 (11:21)  
Great margin for growth in exports
Parliament’s Budget Office says third bailout may be needed
Ryanair ‘not particularly interested’ in Cyprus Air
August 2 expected to be Greek tourism’s D-day
Ministry appeals to keep limit on prescriptions
Faced with the prospect that its attempts to rein in spending on medicines will be scuppered, the Health Ministry appealed on Monday against a Council of State ruling to temporarily suspend ...
Universities aghast at new schools opening
University officials have decried the government’s decision to open two new departments at the same time that funding for the tertiary institutions continues to be slashed. It emerged that t...
Inside News
VOLLEYBALL
Volleyball national team second in European League
Much as the national volleyball team tried to repeat in the finals of the European League the feat it had achieved in the semifinals, it failed to overturn the advantage Montenegro had got f...
SOCCER
Ranieri says he has little to change in Greek national team
The Hellenic Football Federation (EPO) presented Claudio Ranieri as the new Greece coach for the next couple of years, after the Italian manager signed his contract in Athens on Friday. “I l...
Inside Sports
COMMENTARY
Weighing all the factors
Certain people in the know continue to believe that snap elections will take place in the fall. Prime Minister Antonis Samaras is obviously aware of this trend, which is why he told Parliame...
EDITORIAL
Clear rules, for everyone
If we want to deal with the economic crisis, we need clear rules. A large number of individuals and businesses have amassed huge debts they cannot service. And some worrying symptoms have al...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Ministry appeals to keep limit on prescriptions
2. Great margin for growth in exports
3. Universities aghast at new schools opening
4. Greece to hold next talks with troika in Paris, not Athens
5. Anastasiades sees lack of progress on Cyprus talks
6. Supreme Court deputy prosecutor says ex-finance chief should be tried over ‘Lagarde list’
more news
Today
This Week
1. Defense Minister Avramopoulos to represent Greece at European Commission
2. Tree collapses in village square, killing nine-year-old boy
3. Euro inflation seen testing ECB patience as stimulus takes time
4. Minister mulls fixing food and drink prices at non-private beaches
5. Maziotis moved to Diavata Prison in Thessaloniki
6. Multi-bill containing prior actions ready for Parliament
Today
This Week
1. Climber dies in Mount Olympus fall
2. Greek sovereign debt at 174.1 percent of GDP in first quarter
3. Unequal after death
4. Hedge fund Dromeus turns Greek tragedy to triumph with 160 pct gain
5. Quadriplegic woman on life support 'dies due to unpaid power bills'
6. Front-line threats
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.