Greece sealed its complete return to the bond markets on Wednesday with the very successful issue of a new 30-year bond, which has completed the Greek yield curve and confirmed the country is back to normalcy.
Demand for Greece’s longest issue since 2007 was impressive, to say the least, as the bid book exceeded 26 billion euros, which is more than 10 times the €2.5 billion the Greek state raised in the process, at an interest rate of 1.956% with the coupon at 1.875%.
This demand was Greece’s second greatest ever after the €29 billion offered for the 10-year paper issued in January, while quality investors responded with a resounding vote of confidence in the Greek economy.
This is also the second Greek bond issue after last year’s 15-year paper that matures after 2032 (i.e. after the date up to which the country’s debt is guaranteed). As Finance Minister Christos Staikouras said, the recreation of the Greek yield curve is normalized with additional depth, offering security to investors as in terms of time it by far exceeds the expiry of the debt settlement measures agreed with the country’s creditors. It also contributes toward the further improvement of the debt’s sustainability, he said.
The guidance rate had been set at 160 basis points above mid-swap, but the strong demand that reached €26.1 billion led to the final rate of 150 bps plus mid-swap.
Given that the new bond effectively has a 31-year maturity, as it expires on January 24, 2052, and that there was no other Greek issue for comparison, the price was approached based on data from other countries’ yield curves, such as those of Italy and Portugal. As one market expert noted, the pricing was solid in methodological terms and very positive in market terms.
The timing of the issue was also seen as perfect, as the bonds market is currently building on the expectations European Central Bank chief Christine Lagarde generated last week, saying that Frankfurt will increase its bond buying pace through its PEPP program.
The cash raised will also fill up the state coffers and will head either to footing the huge bill of the pandemic’s support measures, or the second early repayment of the International Monetary Fund loans that expire this and next year.