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International investor demand for new Greek 7-year bond

posted onJanuary 31, 2018
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As Greece heads toward the end of its third bailout program, investors are ready to welcome the government's new seven-year bond reports Bloomberg. When the country returns to the market in the coming days, it will probably find many buyers not only because its economy is stabilizing, but also because “it is difficult to find appealing European bonds”  according to Dimitris Dalipis, head of fixed income at Alpha Trust Mutual Fund Management SA in Athens.  The new seven-year Greek bond is expected to raise at least 3 billion euros and will likely have a return of 3%, depending on demand, Dalipis told the news agency.

“Yields have fallen significantly during the last months, but even now spreads are high,” Giuseppe di Mino, managing director at Amber Capital in London told Bloomberg. “We will consider participating in the new Greek bond sale when the time comes” he added. Amber Capital which  owns 1 percent of Hellenic Telecommunications Organization,  bought Greek bonds last year.

Nomura International analyst Ioannis Sokos noted that there is currently a positive momentum towards Greece while Nicholas Wall, portfolio manager at Old Mutual Global Investors said he expects there will be strong demand for a Greek seven-year bond. According to Wall, bonds can be welcomed by investors because of the improvement of the Greek government's relationship with its creditors.  

“As long as that environment remains, investors will continue to like Greece in a market starved of decent opportunities,” he told Bloomberg. He also expects “a seven-year Greek government bond to come around at 3.25-3.30%”.

10year greek bonds

Greece raised €3bn in July 2017 with its first bond sale in three years, around half of which involved swapping existing debt for longer-dated paper. It also implemented a €30bn voluntary bond swap  in November aimed at boosting market liquidity and attracting long-term investors. The swap had the approval from the IMF, the European Stability Mechanism (EMS), and the European Central Bank. Greece’s debt management agency PDMA offered to exchange government bonds issued after a debt restructuring in 2012 for five new benchmark issues with maturities ranging from five to 25 years and coupons ranging from 3.5 to 4.2 percent. BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC and Merrill Lynch were joint lead managers for the swap.

The seven-year paper will be followed by a three-year bond and a 10-year bond Bloomberg notes, so the government can fill the gaps in country’s bond curve and secure the cash buffer.

“To prevent any possible disturbances in the markets because of the Italian elections from affecting its efforts, the government may sell the three-year bond before the vote on March 4. This means that the 10-year benchmark issuance will come later this year, probably before the end of the bailout program in August” it concluded.

UPDATE 08/02/2018 13:12

Greece has launched a seven-year bond auction on Thursday at a starting rate of 3.75 percent, state finance officials said. The decision followed a two-day delay due to this week's turmoil in financial markets.

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