Thursday September 18, 2014 Search
Weather | Athens
27o C
19o 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)  
ECB hands out cheap credit to banks to boost economy
ECB outlines new plan that will give more voting power to bigger states
Unemployment at 26.6 percent in second quarter of 2014
European stock-index futures advance after fed policy decision
Court rules ADEDY strike illegal
An Athens court on Thursday ruled that an upcoming strike called by civil servants union ADEDY in protest to government plans for an evaluation program in its sector, was illegal. The umbre...
Jet ski collision leaves one dead in Santorini
A 39-year-old foreign national died following a collision between two jet skis on the Cycladic island of Santorini on Wednesday. News of the fatal accident emerged on Thursday. The victim, w...
Inside News
SOCCER
Financial crisis forces Greek second division postponement
Greece's second soccer division Football League announced on Wednesday the postponement of the start of the season due to financial difficulties being faced by most clubs. "The board of dire...
SOCCER
Mitroglou rediscovers scoring touch after Fulham let-down
Costas Mitroglou banished the memories of his disappointing spell in England after breaking a 10-month goal drought as Olympiakos Piraeus secured a thrilling 3-2 Champions League win over At...
Inside Sports
COMMENTARY
Greek societys and lenders fatigue
The issue of early elections continues to dog the coalition government despite all the official denials. That the administration is losing its cool is obvious. The political discourse has no...
EDITORIAL
Legitimacy control
The process of checking the authenticity of the qualifications of civil servants hired in the broader public sector during the period of major waste and corruption must move on. The evaluati...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Court rules ADEDY strike illegal
2. Jet ski collision leaves one dead in Santorini
3. ECB hands out cheap credit to banks to boost economy
4. People above banks, Pope Francis tells Tsipras at the Vatican
5. Keratsini marks one year from Pavlos Fyssas murder
6. Griveas, Vatsika granted deposition extension
more news
Today
This Week
1. Extradited Greek couple to face magistrate in Athens
2. SYRIZA ahead of ND, new opinion poll shows
3. National Bank of Greece said to pick advisers for Turkish sale
4. Man's charred remains retrieved from vehicle following accident
5. Bank of Cyprus sells UK loan portfolio
6. European stock-index futures advance after fed policy decision
Today
This Week
1. Greece on standby
2. Central Athens traffic restrictions back in force on Monday
3. Avramopoulos appointed Commissioner for Migration and Home Affairs
4. Greece at bottom of social justice scale among EU28
5. EU bank tests may miss trillion dollar risk, study finds
6. Lost in the fog
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.