Record low spread on bond issue

Reopening of 10-year bond fetches another 2.5 bln euros with total bids exceeding €29 bln

Record low spread on bond issue

Greece posted a new record at the reopening of its 10-year bond on Wednesday, with the investment community granting it a strong new vote of confidence. While the bids book matched that of the original issue of the benchmark paper in January, the country on Wednesday achieved the lowest spread between a Greek issue’s yield and that of the German bund since 2008.

That spread, which effectively measures markets’ confidence in Greece (the lower the spread the higher the confidence), amounted on Wednesday to 115 basis points, down from 135 bps in January.

More than 300 investors applied to buy Greek debt in Greece’s fourth market foray this year, which was the eighth since the outbreak of the pandemic. Bids exceeded 29 billion euros while the vast majority of bidders were foreign portfolios and institutional investors.

The final yield amounted to just over 0.9%, down some 8 bps from the original guidance rate, and the coupon amounted to 0.75%, with Greece raising €2.5 billion in the process.

The market now views this 10-year bond that matures on June 18, 2031 as the absolute benchmark, as its issue size has grown from €3.5 billion to €6 billion. Market sources note that Greek bonds have returned to the investment grade group, at least regarding the technical aspects of issues, such as the size of the book bids and the yield and spread levels.

Notably, the Greek state also raised another €1.6 billion yesterday with the issue of one-year Treasury bills at a historic low interest rate of -0.31%.

Finance Minister Christos Staikouras stressed on Wednesday that the issue confirms that the country is earning the confidence of the international investment community and is gradually returning to full normalcy.

That €2.5 billion will be added to the €33.7 billion cash buffer, while in the next few weeks more inflows are expected from other sources, such as SMPs and ANFAs and the disbursements of the Next Generation EU fund. This may well mean that Wednesday’s was Greece’s final market foray this year, though everything will depend on the course of the economy and the pandemic.

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