Multiple benefits of Greece’s 15-yr bond issue

Multiple benefits of Greece’s 15-yr bond issue

Analysts see multiple benefits for the Greek economy, banks and enterprises from the 15-year bond issue, on Tuesday besides the low interest rate and the strong demand recorded, as there was no pressing need for the country to obtain fresh funding; rather, it needed to send a meaningful signal to the investment community.

Tuesday’s 15-year note was the first long-term bond issued by the Public Debt Management Agency (PDMA) since the outbreak of the crisis. The Greek state raised 2.5 billion euros and bids added up to 18.8 billion euros – the highest level a Greek issue has seen since 2014 – while the final interest rate amounted to 1.91 percent and the coupon 1.875 percent.

The first benefit for the state is that Tuesday’s issue led to an improvement of the investor base and market liquidity, along with the reduction of PDMA’s treasury bill exposure. Some 70 percent of the issue went to long-term investors, while just 5 percent was bagged by hedge funds.

The issue crossed the frontier in terms of the time up to which the creditors have said the Greek debt will remain sustainable: “Greece has succeeded in the major challenge of the 15-year paper,” a market professional told Kathimerini, stressing that investors showed they view the Greek debt to be sustainable beyond 2032, until when the Eurogroup measures will apply.

Capital Economics analyst Melanie Debono told Kathimerini that the high demand reflects the markets’ view regarding Greece’s reduced risk, while the issue itself proves the government’s pledge for the country to obtain funds only from markets so as to pay off its dues in the coming years.

The issue’s success is also a strong asset in Greece’s negotiations with its creditors concerning the reduction of primary surplus targets, while further improving the Greek yield curve.

Finally, Tuesday’s positive news improves the environment for Greek banks and enterprises too. Bank sources say that the long-term issue improves the prospects of local lenders, which this year need to tap the markets themselves.

The 15-year debt issue will make it easier for them to access the markets than a bond of shorter maturity would have.

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