Record low rate in bond issue

Record low rate in bond issue

The state coffers got a 3.5-billion-euro boost on Wednesday through the issue of a new 10-year bond, with Greece registering two new records: Its biggest ever book of offers for a Greek sovereign bond and its lowest ever cost of borrowing.

The country’s cash reserves will now grow to about €36.7 billion, sending a strong signal to markets that the country has no liquidity or financing problems.

The sum of bids tabled on Wednesday for the issue by more than 300 investors exceeded €29 billion, beating the 2010 record of €25 billion for a five-year issue, with Greece drawing more than the originally planned €2.5-3 billion. The vast majority of buyers were foreign portfolios and institutional investors.

The final yield came to 0.807%, down 10 basis points on the guidance rate, while the coupon reached 0.75%. The reissue of the 10-year bond last September had achieved an interest rate of 1.187%.

It took less than three hours for the issue to be completed, as some €20 billion of bids were made in the first hour alone. “This is the fifth time after the outbreak of the pandemic that the country has successfully raised resources on the markets. It did so at a new historic low regarding the cost of borrowing for the Greek state, regardless of duration,” said Finance Minister Christos Staikouras.

Speaking to Kathimerini, Antoine Bouvet, senior rates strategist at ING, commented that the size of the issue and the bids book and the level of the yield point in the same direction: that Greek bonds are returning to the investment rate group, at least as far as the technical elements of supply are concerned.

He added that while the Greek bond issue may have benefited from the political uncertainty in neighboring Italy, in practice the strong fiscal and monetary support is what keeps investors interested in the Greek issues.

It appears that investors remain hungry for positive yields in an environment full of negative interest rates, with Greek bonds offering the region’s most attractive option.

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