The Greek government has indirectly admitted it has shelved plans to issue a new bond this year, with the first draft budget tabled on Monday showing that they have been pushed back to 2019, while existing Greek bonds suffered fresh pressure on Tuesday due to concerns about fiscal developments in Italy.
The yield on Greece’s benchmark 10-year bond climbed over 2 percent on Tuesday to 4.31 percentage points, reaching a new month-high. The spread between the Greek benchmark and Germany’s equivalent widened to 390 basis points. The yield on the Greek five-year debt reached 3.364 percent, also a new month-high. At the same time, Irish, Spanish and Portuguese bonds suffered no impact from Italy.
The draft budget states that, “following the issue of a seven-year bond in February 2018, the planning of issuing policy for 2019 provides for a series of new fixed-rate bond issues of key durations that will fill the gap of the Greek debt portfolio maturity spectrum.”
In practice, this means that Greece will complete more than a year without a new foray into the money markets, which in a way justifies the reserved attitude of investors after the instability of Greek bonds.
“Today’s environment, dominated by increasing risk aversion due to the situation in Italy, certainly does not support the issue of bonds by Greece,” as Gianluca Ziglio, senior fixed income analyst at Continuum Economics, told Kathimerini. He added that the Greek government itself “appears to have acknowledged that. The first thing that has to be done is for markets to get used to Greek issues, allowing investors to change their reports instead of abstaining until they are ready to take more risk.”
This is the very objective of the government. The draft budget notes that the targets of the issuing policy for 2019 and after that will be orientated toward bond issues of high liquidity and volume, and toward the constant presence of the Greek state in the international money markets as an issuer of sovereign bonds.