The Greek state has increased its cash leeway for meeting the challenges of the Covid-19 crisis by 2 billion euros thanks to Wednesday’s issue of a seven-year bond, Greece’s first market foray after the outbreak of the health crisis in Europe and the country’s inclusion in the European Central Bank’s emergency bond-buying program.
Offers for the 7-year paper came to 6.3 billion euros, including 525 million euros from lead managers Citi, Commerzbank, Credit Suisse, Morgan Stanley, Nomura and Societe Generale, with the issue’s final interest rate coming to 2.02 percent.
Part of the issue was covered by local lenders, which after the ECB’s waiver are now allowed to use Greek bonds as collateral to secure liquidity from Frankfurt. However, Finance Minister Christos Staikouras announced that the majority of buyers were foreign portfolios and institutional investors.
The level of bids was substantially lower than that for the 15-year bond Greece issued in January (18.8 billion euros), before the coronavirus crisis, when Greek yields fell to record lows, but as the minister had stated earlier in the day, Greece is not aiming to tap the markets for large amounts as the needs of the Greek state are not the same as those of other countries.
The 2.02 percent rate was slightly higher than market estimates of 1.9 percent, illustrating the difficult market conditions, especially on a day when the International Monetary Fund warned that the national debt could soar above 200 percent of gross domestic product due to the 10 percent recession the Fund is projecting for Greece this year.
Nevertheless, as Staikouras pointed out, the interest rate is a “pleasant surprise” because it is on a par with a similar issue last July (1.9 percent) in a far more favorable climate, and much lower than that of February 2018 (3.5 percent).
DZ Bank analyst Daniel Lenz commented to Kathimerini that the issue proved quite robust, collecting over 6 billion euros, with Greece drawing just a third of that, while the final interest rate was 10 basis points below the original guidance.