D-day for Greece’s bond market return

D-day for Greece’s bond market return

Tuesday marks Greece’s first attempt since 2014 to tap international markets with the issue of a five-year bond. The announcement of the book opening was made on Monday in a statement via the Athens stock market.

Greece is returning to the markets in a very cautious manner, as the official announcement by the Hellenic Republic mentions neither the amount nor the interest rate of the issue.

The process will be completed over the course of the day and will have three main pillars: a swap of bonds maturing on April 17, 2019 for the new five-year paper, the return of bonds expiring in 2019 through paying 102.6 cents per euro, and the sale of new bonds through cash.

In a conference call with bond managers in Greece and abroad Finance Minister Euclid Tsakalotos said that “the tough measures are now in place, we have the growth ahead of us.”

Tsakalotos added that the European Central Bank might include the Greek bonds in its quantitative easing (QE) program in October, which he said would help the Greek economy.

The prime minister’s office said in a statement that the issue is aimed at managing and reducing future borrowing needs and making the new bond a reference point for Greek paper.

The decision to return to the markets was based on a series of favorable developments for Greece: the Eurogroup decision on June 15 that closed the second bailout review, the upgrading of the country’s credit rating by Moody’s to Caa2 on June 23, the emergence of the country from the excessive deficit procedure on July 12, the agreement in principle with the International Monetary Fund for its involvement in the Greek program last Thursday, and the upgrading of Greece’s outlook to positive by Standard & Poor’s last Friday.

Greece has commissioned six banks from both sides of the Atlantic to manage the bond issue: They are BNP Paribas, Citigroup Global Markets Limited, Deutsche Bank AG, Goldman Sachs International Bank, HSBC Bank Plc and Merrill Lynch International.

The markets reacted favorably on Monday, as the price of the two-year bond rallied to 102.60 cents and the yield slid to 3.20 percent.

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