Greece Readies First Bond Since 2010

Greek_bondJust a couple of days after Finance Minister Yannis Stournaras said the government wasn’t ready to issue its first long-term bond in four years, Greece is ready to do so on April 10, a day before German Chancellor Angela Merkel visits Athens.

Greece’s agency for managing public debt and the Finance Ministry made the announcement on April 9 and said it would be subject to British law but didn’t provide details on the amount or expected interest rate.

But the news agency Reuters, citing three unidentified sources, said the bond will be a five-year issue for up to 2.5 billion euros, ($3.44 billion). One said there is the expectation of strong interest even though private investors two years ago were stiffed with 74 percent losses.

“It will be a great success if the coupon is below 5.3 percent,” interest the official added.

Greece has been locked out of the markets since 2010 when it first went hat-in-hand to the International Monetary Fund for help.

The IMF was joined by the European Union and European Central Bank in the so-called EU-IMF-ECB Troika which has provided two bailouts of 240 billion euros, ($330.7 billion,) most of which run out this year.

Since then the government has raised about 15 billion euros in short-term treasury bills but this is the first time it’s testing the water for long-term bonds and a full-fledged return to the markets although the economy remains in a deep seven-year recession.

Greek 10-year bond yields have fallen rapidly to about 6 percent in recent weeks, down from about 40 percent two years ago when the country imposed the severe losses on private bondholders in a 130 billion euro debt restructuring.

On April 7, foreign investors, sensing profits, quickly bought up about 80 percent of a 1.3 billion euro six-month T-bill issue.

Greece is still rated nine notches below investment grade at Caa3 by Moody’s. Standard and Poor’s and Fitch rank Greece six notches below investment grade at B-. Moody’s recently said it would delay another rating until August.

Investors are sensing a possible Greek recovery after the government said it would have a primary surplus of up to 2.5 billion euros and struck a deal with the Troika over reforms that has keyed the release of a long-delayed 8.3 billion euro installment, although many economic problems remain.

Labour unions staged a nationwide strike on April 9 to protest austerity policies imposed on the country by its foreign creditors, including Germany, the biggest contributor and biggest profiteer.