Double strike against debt
Greece plans to issue a new 15-year bond and swap older ones with cash, using its reserves
The Public Debt Management Agency is launching a two-pronged attack on Greece’s national debt.
It is issuing a new 15-year bond – which confirms Greece’s continued presence in the markets and capitalizes on the positive climate that has been created since the elections – as well as proceeding with a bond swap; this concerns debt maturing soon, to be swapped with cash, in a sign of confidence Greece is delivering on its commitment to reduce the debt.
The market as well as analysts who deal with Greece have estimated that this fall Greece will recover investment grade after 13 years, as has been reflected in the spreads of the Greek bonds which maintain their distance with Italy (-37 bps) and have come quite close to Spain (+31 bps).
However, according to investment firms, most of the rally in Greek stocks has already happened and therefore the scope for further improvement is not great. At the same time, there are estimates for a general widening of spreads in the eurozone in the year’s latter half. ‘Greek bonds are already trading as if they are investment grade, but with their yields now considerably lower than Italian ones, I don’t see much room for a tightening of the spread,” notes Themis Themistokleous, head of the UBS investment office for Global Wealth Management in Europe, the Middle East and Africa. “Spreads look expensive and may increase in general,” he adds to Kathimerini.
According to bank estimates, the yield on the new 15-year note could hover around 4.5% if issued now, but would rise to 5% if issued in September.
The second move of the PDMA is the invitation to bondholders who hold the bond maturing on April 2, 2024, with a yield of 3.45%, amounting to 2.5 billion euros (of the 5-year issued in February 2019), and the bond maturing on February 15, 2025 yielding 3.375%, amounting to €3 billion (of the 7-year issued in February 2018).
The repayment of these two bonds by the Greek state using the cash reserves effectively reduces the debt as it cuts the country’s financing needs for the next two years.
