Greece raised 2.5 billion euros from a new five-year bond at a relatively competitive yield, drawing strong demand in a small but significant step towards refinancing its debt from markets after years of tight supervision under bailouts.
The bond issue, yielding 3.6 percent and the country’s first since its third international rescue package ended in August, drew investor orders worth four times the issue’s size, government officials said on Tuesday.
Athens has tested market appetite for its debt in recent years, while under the watch of its bailout creditors. It sold 3 billion euros ($3.4 billion) of seven-year bonds nearly a year ago.
Greece has enough cash to repay roughly 12 billion euros in loans that fall due this year and can stay afloat up to 2021. But it wants to return to bond markets as a regular borrower after nearly a decade in crisis.
“If you look at the investors who participated, you will notice a significant transition from hedge funds to normal investors,” Finance Minister Euclid Tsakalotos told parliament. “Greece is changing category.”
He said the bond’s coupon was lower than 3.5 percent. At 3.6 percent, the yield was lower than initial guidance of 3.75-3.875 percent, but still high compared to Greece's euro zone peers.
“The fact that Greece returned to bond markets without any support from its lenders or a bailout guarantee is a very significant development,” said Takis Zamanis, chief trader at Beta Securities.
“Greece can achieve a lower yield next time, as long as it continues fiscal improvement efforts. It aims for a yield closer to that of other euro zone countries.”
Greece’s 10-year bond yield fell five basis points to 4.00 percent, its lowest level since early August. Five-year bond yields were down 4 bps at 2.99 percent and not far off recent lows.
BofA Merrill Lynch, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley and SG CIB were joint lead managers for the transaction.
Greece has said it plans to raise up to 7 billion euros from the bond market this year. Tsakalotos said that Tuesday’s issue accounted for 36 percent of what Greece aimed to raise.
As a safety net, Athens has built a 26 billion euro cash buffer from unused bailout loans and money raised from markets. [Reuters]