Bond in strong demand

LONDON – Greece drew strong demand for a 5.0-billion-euro 10-year bond yesterday as the long maturity appealed to yield-hungry investors willing to overlook the budget pressures the country faces. Just last week, the International Monetary Fund warned that while the 2004 Olympics boosted the Greek economy, gaping deficits and high inflation could impede future growth. Standard & Poor’s in November 2004 downgraded Greece’s rating to A from A+, saying there was no resolute strategy to cut public debt. Fitch Ratings followed suit in December, also cutting the sovereign’s rating one notch to A. Greece was only the second eurozone member ever to suffer a downgrade, following Italy. Investors, though, seemed willing to look past this. Caspar Bentinck, a syndicate manager at Lehman Brothers, one of the banks managing the bond sale, said that the final order book for Greece’s deal was 11.8 billion euros. «We opened the books on Monday morning and by lunchtime had a book of 10 billion,» he said. That led pricing to be brought forward a day and also allowed the spread to ratchet in a basis point to 19 basis points over the Bund, Bentinck said. «Greece is very attractively priced where it is. You’ve seen very strong performance by some of the euro accession countries that are trading through Greece, so people can see the relative value here for a member of EMU,» he said. The long maturity only helped. «Everyone’s looking for yield, and they’re willing to take more duration to get it,» Bentinck said. Some argued that Greece could have sliced another basis point off the pricing. «The fact that the spread was tightened to 19 basis points was in itself a good sign the sale would do well,» said Marc Ostwald, bond analyst at Monument Securities in London. «But I think the spread should have been 18 basis points. Hence, there was a one-basis-point concession built in in there to win over the investors. It is not a bad result for a country whose ratings were downgraded only a few months ago.» The deal is one of a number of long-dated sovereign government bonds in the market. Portugal, which also faces budget pressures, is set to price a 3.0-billion-euro bond due April 2021 today, while Hungary yesterday priced a 1.0-billion-euro 15-year bond. Terms Greece sold a 5.0-billion-euro bond due July 2015. It pays a coupon of 3.7 percent and was priced at 100.006 to give a spread of 19 basis points over the 3.75 percent Bund due January 2015. Alpha Bank, EFG, HSBC, Lehman Brothers and Merrill Lynch managed the sale. Twenty-three percent of the bond went to Greece, with the remainder spread evenly around Europe and with 7 percent going to the US, Lehman’s Bentinck said. Asset managers and banks accounted for 66 percent of the deal, with 11 percent going to hedge funds, he said. Greece is rated A1 by Moody’s Investor Service and A by both Standard & Poor’s and Fitch Ratings.

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