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Greece comes out of bond exile


By Elaine Moore in London and Kerin Hope in Athens

Robust demand for five-year debt; Order book hits €11bn; Yield of 5%-5.25% predicted

Greece has returned to global capital markets for the first time since the eurozone crisis erupted in 2010, attracting big demand for its government bonds in a sign of growing confidence in the region’s weakest economies.

Investors rushed to place €11bn of orders for the five-year bonds yesterday, just four years after its debts triggered an international crisis that threatened to destroy the euro.

Following a painful period of austerity and the biggest debt restructuring in history, Greece achieved a primary surplus in 2013. But with high levels of unemployment, it remains the weakest link in the 15-year old currency union.

As if to underline the fragility, the country’s unions embarked on a nationwide anti-austerity strike yesterday, forcing schools to close and bringing parts of the public transport network to a standstill. News of the debt sale was barely reported in Athens due to television blackouts.

The €11bn order book is about four times higher than the amount Greece is expected to raise. Bankers were predicting a yield of between 5 per cent and 5.25 per cent, lower than some analysts had forecast.

Antonis Samaras, Greece’s prime minister, is keen to show that Greece is able to borrow money independently of its troika of international lenders – the European Central Bank, the IMF and the European Commission. The bond will be governed by UK law in an attempt to attract investors who fear that they could be wiped out by another debt restructuring.

One Athens banker said today would be a moment for “rejoicing”, especially if the yield was below 5 per cent. He said Greek banks were excluded from the five-year issue because it “was important to tap foreign investors to send the message Greece is back”.

Greece is taking advantage of falling borrowing costs across Europe amid growing speculation that the ECB is set to embark on a round of quantitative easing.

Greece’s benchmark borrowing costs on the 10-year bond hit more than 30 per cent after the debt restructure in 2012, but have fallen below 6 per cent.

However, Alan Wilde, head of fixed income at Baring Asset Management, said: “I still can’t see why anyone would want to own Greek debt. Greece comes into the category where it renegotiated but did not repay the debt that it owed.” (FT)

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