Spreads grow but borrowing is vital
The Finance Ministry is preparing to issue five-year bonds next week, although the spreads keep growing, while a new 10-year bond is likely within the first quarter of the year, the head of the Public Debt Management Agency said yesterday. The interest rate difference between the Greek five-year bond and its German equivalent grew to 371 basis points (bps) yesterday from 323 on Thursday, while the rate of the benchmark 10-year bond was at 6.2 percent after its spread versus the German Bund hit a record 313 bps. «We decided to go with the five-year bond for now,» PDMA head Spyros Papanikolaou said in an interview. «It’s still our plan to sell 10-year bonds in the future, most likely in the first quarter.» This five-year issue will be the first crucial test for the Greek bond market this year and will determine how easy it will be for Greece to borrow the 53 billion euros it is estimated to require this year. Next month, there will be a fresh issue, whose maturity period has not yet been made public. The state aims at drawing in between 3 and 5 billion euros, while it has already borrowed 5.6 billion euros. This also puts an end to the option regarding a private placement, which would have allowed for some profiteering speculation on the market. With spreads growing and markets being extremely cautious about Greek bonds, the state will have to pay more to borrow money this year, which in turn is hurting the euro itself as fears Greece may be forced to seek a bailout from its eurozone peers remain despite persistent denials by officials. In an article published yesterday in the Financial Times, Bank of Greece Governor Giorgos Provopoulos blasted all reports and rumors suggesting Greece might opt out of the eurozone, arguing that the country will find it easier to solve its problems inside the economic and monetary union than outside it.
