Successful high-yield bond issue

Successful high-yield bond issue

In a very carefully planned bond issue, the first after the end of the bailout programs in August 2018, the Greek state drew 2.5 billion euros on Tuesday, making the most of the currently favorable market conditions.

The new bond has a five-year maturity, expiring on April 2, 2024, a yield of 3.6 percent and a coupon of 3.45 percent, with bids exceeding 10 billion euros.

Although the issue is seen as good by Greek standards, with the Public Debt Management Agency achieving a much better yield than previous issues, it shows that a full return to the markets will by no means be an easy proposition for Greece. The cost of borrowing for Greece is eight times higher than Portugal’s (which stands at 0.47 percent), 16 times higher than Spain’s (0.23 percent) and more than twice Italy’s (1.55 percent). This shows a 10-year bond issue – which would signal that Greece is back to normal – remains some way off.

On the positive side, Greece managed to attract long-term investors, avoiding the possibility of an accident. Still, it was clear that investors were only attracted by the high yield, otherwise they would have stayed away.

Athens was keen not to repeat the failure of last year’s seven-year bond, which ended in significant losses for buyers. As a British fund manager who participated in the issue told Kathimerini, “the Greek government ought to be careful not to go overboard with this issue, not to be greedy as it was with the seven-year note and to maintain a rational level.”

Finance Minister Euclid Tsakalotos spoke of an issue beyond expectations. Speaking in Parliament, the minister described as very positive the fact that more long-term investors took part and that there was an important swing away from hedge funds.

New Democracy financial affairs spokesman Christos Staikouras said Greece tapped the markets at a cost that was far higher than other eurozone states that completed bailout programs, such as Cyprus. It has also been saddled with a far higher yield than bonds of the same maturity, such as Portugal’s, while drawing a much smaller amount.

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