Two messages from Greece’s first 2022 foray into markets

The Eurozone is saying goodbye to the environment of very low interest rates with Greece making its debut in the markets with a higher interest rate, but recording strong demand. The offers for the new ten-year bond exceeded 15 billion euros and the Greek government raised 3 billion euros with the yield reaching 1.8%, from the low 0.88% of last June.

According to Public Debt Management Agency (P.D.M.A.), the composition of investors was 84.5% from abroad, 15.5% from Greece and 87.2% institutional.

That means investors are still showing confidence in the country, but also that this new era of higher financing costs requires a very cautious fiscal policy, following two years of easing due to the pandemic, which has driven the Greek debt-to-gross domestic product ratio above 200%.

The Greek state has raised 3 billion euros, expanding its cash buffer to €40.7 billion, at an interest rate of 1.83%; that is clearly far higher than last year, but still well below the period before the pandemic, in what currently is a tough time for the markets.

As Danske Bank’s chief bond analyst Jens Peter Sorensen noted to Kathimerini, “That was a decent issue with an absolutely reasonable timing, despite conditions.”

The high uncertainty resulting from the successive waves of the pandemic, the rise in inflation and central banks’ swing to a tighter monetary policy have created a new market landscape, with yields steadily on the rise.

In that context, the Greek 10-year paper enjoyed quite strong demand that topped €15 billion, although it was around half of that recorded last June, at the reopening of last year’s 10-year issue – that is also a trend recorded by other countries making market forays, such as Italy and Portugal.

The original guidance of Wednesday’s issue was set at 1.89% and at 145 basis points plus mid-swap, but that went down by five basis points, with the coupon eventually settling for 1.75%.

ING strategic analyst Antoine Bouvet told Kathimerini that Greece did the right thing choosing to hit the markets now, before the board meetings of the European Central Bank and the Fed, while regular and steady forays under any conditions create a profile of a proper issuer, he added.