Finance deputy says gov’t plans 50-yr bond issue

Low long-term interest rates are spurring Greece to issue its first-ever 50-year government bond to take advantage of low borrowing costs, the country’s deputy finance minister said yesterday. Greece, which joined the eurozone in 2001, is one of the bloc’s most indebted countries in terms of percentage of gross domestic product (GDP). It is scrambling to reduce its mountain of debt and shrink its budget deficit to below the EU’s 3 percent cap. If market conditions are right, Greece plans to issue a 50-year government bond in the first half of this year, Deputy Finance Minister Petros Doukas said. «We are seriously looking at issuing a 50-year bond. The issue will take place in the first half [of the year]. The amount we are looking to raise is -500 million to -1 billion. It will not be a syndicated issue,» he told reporters. The minister said Greece would seek to take advantage of a flat yield curve. «With the yield curve flat, the cost of the 50-year bond will not be above that of 30-year government paper. Historically, we may not see such low interest rates (again),» Doukas said. He said the final decision would depend on market conditions. «We will do it if we see that the terms are satisfactory for the state. Chances are higher than 50 percent that we will proceed with the issue,» Doukas said. Private placement The head of Greece’s Debt Management Agency (PDMA) said the bond would be privately placed. «The 50-year bond will not be a syndicated issue but a private placement,» PDMA head Spyros Papanicolaou told Reuters. Greece, which borrows as the Hellenic Republic, is rated A1 by Moody’s Investors Service and A by both Standard & Poor’s and Fitch Ratings. The government is aiming to reduce public debt to 100.4 percent of GDP from an estimated 104.3 percent in 2006. Total borrowing via bonds this year is seen as reaching -28.55 billion, the minister said. Analysts said a 50-year bond would complement Greece’s yield curve. «Many countries are moving in the direction of long-term debt issuance. These bonds are wanted by institutions such as insurers. The interest exists,» said economist Dimitris Maroulis at Alpha Bank. Locking in low long-term borrowing costs is what’s prompting Greece to look into issuing 50-year paper, said a treasurer at a large Greek bank. «If this issue does well, we can probably expect another syndicated one next year,» said the treasurer, who requested anonymity. (Reuters)

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