MARKETS

Greece returns to bond market

Greece returns to bond market

The Greek state is reopening its seven-year April 2020 bond issue, most likely on Wednesday barring any major unforeseen market circumstances, on the back of the Greek economy’s recent credit rating upgrades.

The Public Debt Management Agency is eager to confirm Greece’s regular presence in the markets, as well as boost the country’s cash reserves amid the energy crisis, so it is moving fast to make the most of recent developments: They mostly concern the one-notch credit rating upgrade by Standard & Poor’s last Friday that has taken the country to a step away from investment grade – making the rating agency the second after DBRS Morningstar to do so, only this time with a positive outlook too.

Greece has commissioned the services of international investment banks BNP Paribas, BofA Securities, Citi, Deutsche Bank, Goldman Sachs Bank Europe SE and JP Morgan for the issue, the PDMA announced on Tuesday, with the amount to be raised depending on demand; banking sources say it will range between 1 and 2 billion euros.

The bond will mature in April 2027, so its reissue practically amounts to a five-year paper. It was issued in April 2020, just after the outbreak of the pandemic, bearing a 2% coupon and a yield of 2.013%. On Tuesday its yield stood at 2.42%. The offers book had come to €5.9 billion, as at least 128 investors participated in the issue from which the Greek state raised €2 billion.

The option of reopening an existing issue instead of a new one is considered safer given market conditions and the major rise in bond yields, not only for Greek debt but also for the entire eurozone. In such conditions, with the European Central Bank also reverting to normal monetary policies after the pandemic, it makes more sense to simply increase the size of an existing issue than drawing a minimum of €2.5-3 billion, a necessary amount for a successful new issue.

This reissue maturing in 2027 will have a very competitive interest rate of approximately 2.5%, while the five-year Italian paper bears a 1.7% yield.