From The Financial Times
March, 4th, 2019
Katie Martin and Michael Hunter in London and Kerin Hope in Athens
Greece is planning to sell its first 10-year bond since it emerged from a succession of punishing bailouts, after a credit-rating agency applauded progress in repairing the country’s battered finances.
The country, which formed the focal point of Europe’s debt crisis from 2009, has mandated a number of big investment banks to handle the landmark transaction.
The sale, expected as early as Tuesday, will seek to raise €2bn-€2.5bn, according to two analysts in Athens who predicted the bond would be offered with a coupon of 3.75-3.95 per cent. It may mark the first 10-year bond issue since March 2010, weeks before the country was shut out of international capital markets and forced to seek the first of three bailouts from the EU and the International Monetary Fund.
“It’s an important moment for Greece’s overall investment prospects and it’s come earlier than we thought,” said one banker. “We were hopeful already . . . but the double upgrade by Moody’s last week has tipped the balance.”
Late on Friday the US-based rating agency lifted Greece by two notches to a B1 rating — still among the so-called junk ratings that indicate a higher level of risk, but nonetheless a sign of rehabilitation for a country now aiming to deliver primary budget surpluses every year between 2018 and 2022.
The move triggered a rally in Greek financial markets on Monday. Yields on the country’s sovereign debt touched 12-year lows, while rising bank stocks made the Athens General the best-performing stock index across Europe.
The 10-year Greek bond yield, meanwhile, fell to its lowest level since early 2006, down 3.3 basis points on the session to 3.61 per cent. That was less than one-tenth of the peak of more than 37 per cent in March 2012, during the height of the crisis.
Greece emerged last August from a €86bn bailout, its third, after enduring the deepest recession on record. By then it had ventured into the international bond markets twice, raising €3bn of five-year money in July 2017 and a further €3bn of seven-year bonds in February last year.
But turmoil in the wider international markets forced the postponement of the country’s first post-bailout debt sale until the start of this year, when it raised €2.5bn in five-year debt priced at a yield of 3.6 per cent.
Greece’s 2019 budget provides for raising €4bn on capital markets, but the debt management agency hopes to raise as much as €7bn if market conditions allow.
In its decision on Friday, Moody’s noted that “the reform programme appears firmly entrenched and reforms implemented are starting to bear fruit.” It added: “A strengthening economy in conjunction with creditor surveillance should further reduce risk of reform reversal.”
Bankers in Athens welcomed the bond sale announcement as a sign that Greece was returning to normal market conditions. One said: “We expect most buyers of Greek bonds this year will still be hedge funds but we’ll see bigger appetite from longer term investors as the year progresses.”
The economic mood is lifting despite uncertainty over the date of a general election, due by October, which is widely expected to take place in May. There has also been a recent slowdown in the pace of structural reforms agreed by the leftwing minority Syriza government.
The government is poised to win EU approval for a new law agreed with Greek banks on protecting about 100,000 cash-strapped first homeowners from foreclosures, without leaving loopholes that could benefit strategic defaulters.
Two separate projects that would each reduce Greece’s €85bn pile of non-performing loans by about €15bn, are also making progress.