From The Financial Times
March, 6th, 2019
Greece has sold its first 10-year bond for nine years, in the latest sign of the ‘Goldilocks’ conditions in the eurozone’s sovereign debt market.
The country, which formed the focal point of Europe’s debt crisis from 2009, raised €2.5bn of paper priced at a 3.9 per cent yield; order books topped €11.8bn.
This is Greece’s first 10-year bond issue since March 2010, weeks before it was shut out of international capital markets and forced to seek the first of three bailouts from the EU and the International Monetary Fund.
A series of blockbuster bond sales since the start of the year has bucked forecasts that demand might suffer after the European Central Bank put an end to its bond-buying programme.
The market began to thrive after January’s policy U-turn by the US Federal Reserve, which was followed by a gloomy update from the ECB, confirming to investors that global interest rates were unlikely to rise in coming months.
That is a boon for European governments with debt to sell, as investors are drawn to the additional yield on offer from longer-dated bonds.
Greece’s move comes just days after Moody’s applauded progress in repairing the country’s battered finances.
Late on Friday the 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 saw Greek bond yields fall to their lowest levels since before the eurozone debt crisis, indicating a rise in price. On Monday, the thinly-traded Greek 10-year bond yield hit a low of 3.6 per cent.
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.
Christina Cho, a senior debt markets banker at BNP Paribas who acted for Greece on Tuesday’s deal, said the country’s strategy was “about returning to normality and becoming a normal sovereign issuer in the capital markets again, building incrementally over each successive issue”.
Greece was attracting a growing number of investors and more international interest in each successive debt sale, according to Ms Cho.
“They don’t have to issue til the early 2020s for financing needs — their cash buffer covers all disbursements — so the point of accessing the capital markets now is as much a confidence exercise as it is a funding exercise,” she said.
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.
BNP Paribas, Citi, Credit Suisse, Goldman Sachs, HSBC and JPMorgan acted as joint lead managers on Tuesday’s bond sale.