The Greek state will likely reopen its 10-year bond issue from January on Wednesday, market conditions permitting, in a carefully thought-out move. the Public Debt Management Agency (PDMA) has since April been planning to make the most of the favorable conditions in the market that have brought the Greek-German bond spread to its lowest level since 2008.
The move is strategic rather than cash-minded, as it forms part of the policy for front-loaded issue activity the Finance Ministry has been pursuing for some time. It aims at the country having a frequent presence in the market and the modeling of the Greek yield curve through strengthening the liquidity of Greek bonds.
Wednesday’s objective will be to raise some 1.5-2 billion euros, though the final amount will depend on investor demand; therefore the 10-year debt maturing in June 2031 will grow from €3.5 billion to some €5-5.5 billion. The bookrunners will be BNP Paribas, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan and Nomura.
When the bond was originally issued in January the yield amounted to 0.807% with the spread at 135 basis points and the coupon at 0.75%. Wednesday’s opening yield is expected to be higher, at about 0.9-0.95%, but what is important is that the spread with the bund will head lower, around 110-115 basis points.
Certainly the PDMA is riding the wave of strong support from the European Central Bank, which continues to buy more bonds than the country issues, as it has acquired Greek debt of €25.7 billion in the last 15 months against €18.5 billion that Greece has issued in bonds.
The choice of June as the date for the new market foray is based on the notion that there is uncertainty about the prospects of bonds in the year’s second half, given that the ECB might change its strategy regarding its pace of purchases, and that the acceleration of vaccinations and the recovery of the economy could upset the safe havens of state bonds.
After the announcement of the PDMA’s foray plans on Tuesday, the yield of the 10-year bond rose 5 bps to 0.87%.