Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Greece Gets Solid Demand for First Bond Issuance in Three Years

Posted by hkarner - 27. Juli 2017

Date: 26-07-2017
Source: The Wall Street Journal

Government sees as first move to wean country from new bailouts

Greece got solid demand Tuesday for its first bond issuance in three years, in what the government sees as the first of several moves that will enable the debt-ridden country to wean itself from new bailouts.

Tuesday’s deal included an invitation for holders of a bond coming due in 2019 to swap their securities for new ones due in 2022.

Greece sold €3 billion worth of the 2022 bond, Greek government officials and bankers said. About half of that is new money, and half is existing investors in the 2019 bond who switched, according to one of the banks managing the deal.

The new bond matures in August 2022 and will yield 4.625%. The 2019 bond is yielding around 3.2%, so investors will be paid a decent premium for participating in the swap.

Greek bonds have been on a tear of late. Greece paid €102.60 per €100 face value of the 2019 bond. A year ago, the bond was trading below €90.

Still, the sum raised is a token—less than 1% of Greece’s total debt—and on its own not enough to forestall the need for more aid or other concessions from its eurozone rescuers. But the bond issuance was meant as a show of confidence and test of investors’ appetite for its debt, two years after the country was teetering on the brink of collapse and eurozone exit. It is also a way to ease a big hump of debt repayments due in 2019.

Athens’ debt office is aiming to go ahead with more bond issues before the end of the country’s third bailout in mid-2018.

“They need to show the market that they can stand on their own feet,” said Giuseppe di Mino, managing director at hedge fund Amber Capital, who expects another Greek debt sale toward the end of the year.

Greek officials hope that this time the return to the markets will be consistent.

Greece’s Finance Minister Euclid Tsakalotos said this Greece first attempt went better than expected and more will follow before Greece fully regains market access when its bailout expires.

“From now on we are focused on August 2018,” Mr. Tsakalotos said in a televised statement. “There will be a second and a third [market access] to approach August 2018 with confidence and emerge from bailouts.”

Previous bonds plunged in value a year later when Greece faced a big political crisis and came close to euro exit. They’ve since come roaring back, rewarding investors such as Charles Zerah, fixed income fund manager at Carmignac, who held on through that white-knuckle ride.

“We had some volatile periods, but nevertheless it has been successful,“ he said. Mr. Zerah said the outlook for Greece has changed compared with 2014, with a healthier European economy and reduced political risk. He added that a “significant turnaround” is also noticed in Greece, citing the government’s progress on economic reforms.

Greece’s economy, which has shrunk by more than a quarter from its precrisis size, returned to growth in the first quarter of the year, but still has a long way to go. Its unemployment has dropped from a staggering 28%, but is still close to 22%, more than double the eurozone’s average.

Still, many investors didn’t touch the Greek bonds because of their junk rating or their poor liquidity.

The International Monetary Fund considers Greece’s debt unsustainable and has demanded EU countries—Greece’s major lenders—offer it debt relief. The EU countries haven’t fully committed.

“If we have some serious talks about debt relief before year end or beginning of first the quarter [of 2018], it could go pretty quickly,” Mr. Zerah said, adding that there could be a decent spread tightening between Greece and Portugal.

Greece is “still the highest yield you can get in Europe,” said Mr. Zerah. Still, “the majority of investors can’t invest in Greece,” he added, because of its noninvestment grade rating.


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