The recent unrest in global bond markets is certainly affecting the plans of Greece’s Public Debt Management Agency (PDMA), but isn’t generating any worries for now.
The new environment requires patience until the market volatility subsides and the European Central Bank issues a response to it, if any. This is because Greece’s cash reserves remain high and are sufficient to support the country’s additional fiscal measures, while the swap move of the 30-year paper by the PDMA in January and the issue of the new 10-year bond mean the agency has already drawn 5.5 billion euros and is adhering to its plans for a market foray in every quarter of the year.
Today the so-called cash buffer comes to €33 billion and is expected to end the year between €22-25 billion. That means it can shoulder the burden of the €11.2 billion measures the European Commission projects, with the continued support from the ECB’s extraordinary bond-buying program (PEPP); Frankfurt may acquire up to €20 billion worth of Greek bonds in the next 13 months, which in a way allows for a small increase in the issuing activity to €12-14 billion this year.
All this means the PDMA can afford to wait and see how the international bond volatility evolves, while any ECB action such as raising the weekly rate of PEPP purchases or even expanding and possibly extending its €1.85 trillion portfolio can only be favorable for Greece.
The only thing the PDMA does not want to see is prolonged volatility and therefore uncertainty for investors, as this tends to damage Greece more given that its debt does not have investment grade status. A temporary jump in yields is not considered a significant blow, as even after the recent rise the benchmark 10-year yield remains below the level it was at just before the pandemic started in early 2020.
The objective of all market forays by the PDMA is to attain interest rates below the average long-term cost of borrowing, which stands at about 3.4%, as they improve the sustainability of the Greek debt.