Huge interest in bond issue

Huge interest in bond issue

The Greek state is expanding its cash reserves by 3 billion euros – to be used for battling the new crisis stemming from the coronavirus pandemic and to support the Finance Ministry’s fiscal measures – after Tuesday’s 10-year bond issue; in terms of the amount drawn, this was the biggest since 2017, when Greece had also raised €3 billion, through a five-year bond issue.

The final interest rate came to 1.57%, against an original guidance for about 1.70%, approaching that of the 10-year reissue last October (1.5%) and far below the average cost of servicing the national debt (1.91%). Demand in this second market foray for Greece during the coronavirus crisis was very strong by Greek standards, with total bids topping €15.75 billion.

In a week full of new debt issues by eurozone member-states, international investors displayed high interest in the new Greek bond, with the book coming very close to that of the pre-crisis 15-year bond issue, when it reached €18.8 billion – the highest for a Greek issue since 2014.

Finance Minister Christos Staikouras stressed that the quality of Tuesday’s issue was very high as the vast majority of buyers were foreign portfolios and institutional investors.

After this 10-year issue, Greece has drawn a total of €7.5 billion from the markets (€2.5 billion from the 15-year issue and €2 billion from a seven-year paper in April) and is the only eurozone country that has not increased its borrowing program for the year originally planned to reached up to €8 billion. However, the Public Debt Management Agency is expected to proceed with a new issue or reissue later in the year.

Before Tuesday’s issue, the Greek cash buffer had come to €33.5 billion, shrinking by just €4 billion from the pre-pandemic amount of €37.5 billion. This is thanks to the PDMA strategy to issue treasury bills alongside bond issues.

On Wednesday the PDMA will auction 52-week T-bills worth €1.6 billion. The ministry’s objective is to have cash availability at €30 billion by the end of the year.

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