Appetite for more bond issues

Appetite for more bond issues

Greece is already mulling its next steps in the markets, including reissues of existing bonds and the issue of a new 10-year note.

The Public Debt Management Agency (PDMA) observed that the high cost the state has to pay for the issue of the new five-year note last Tuesday, a yield of 3.6 percent, has drawn strong demand and improved the climate in the markets for Greece. This foray attracted long-term investors and – as data from the interbank market reveal – avoided a repetition of the negative course suffered by last February’s seven-year bond.

One of the proposals the Finance Ministry and the PDMA are considering provides, according to sources, for a reissue of the new five-year bond or the February 2018 seven-year note. As the new paper matures in April 2024, and the previous five-year bond, issued in 2014, matures this April, a reissue is one of the scenarios being examined.

However, bank sources comment that such a move would hardly make any difference on the yields curve, so the reissue of the seven-year bond would make more sense, especially ahead of a longer-term security.

The PDMA plans also provide for another market foray during the year’s first half. Market sources note that the cautious planning of the five-year bond issue has paved the way for a benchmark issue within 2019.

Sources from the credit sector have not ruled out the issue of a 10-year bond, which the Greek state hasn’t attempted since the outbreak of the crisis; they add that the submission of the bad-loan reduction plan to the European Commission for approval could drive yields even lower. They also argue that the climate in the eurozone bond market, which favors high yields, leading to successful long-term issues by Portugal, Spain, Italy and Ireland in January, also opens the way for the issue of bonds by Greek as well as Italian banks.

Another step Greece is considering after the five-year bond issue, which fetched 2.5 billion euros, is the early repayment of the expensive part of the International Monetary Fund loan to Athens, without using the cash buffer.

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