- Title: GREECE: Country in seven year bond issue
- Date: 30th March 2010
- Summary: ATHENS, GREECE (MARCH 29 2010) (REUTERS) ATHENS STREET WITH ALPHA BANK IN THE DISTANCE EXTERIOR OF ALPHA BANK SIGN OF BANK PEOPLE WAITING TO WITHDRAW MONEY FROM ATM MACHINE MAN WITHDRAWING MONEY PEOPLE WALKING ON THE STREET OUTSIDE BANK MORE OF PEOPLE WALKING ON THE STREET (SOUNDBITE) (English) ECONOMIST GIKAS HARDOUVELIS SAYING "The timing was fine, the Greek government had to test the market and its good that it did it right after the decisions that were taken last week by the European Council. EXTERIOR OF EMPORIKI BANK MAN WITHDRAWING MONEY FROM BANK SIGN OF EMPORIKI BANK EXTERIOR OF EMPORIKI BANK (SOUNDBITE) (English) ECONOMIST GIKAS HARDOUVELIS SAYING "Interest rates are still high, I think it will take some time for the market to absorb the results of that decision, right now they discount the decision but I think the decision means a large drop in spreads, because they are talking about adding a risk premium, a reasonable risk premium on European average interest rates. European average interest rates are at most 100 basis points above German rates if you add a risk premium of say 100 basis points for Greece, that brings you up to 200 - no way its not 300 - so I expect the spreads to decline over time, and the markets are going to focus on the government efforts to actually put a lid on the deficit." PEOPLE WALKING ON THE STREET IN ATHENS MORE OF PEOPLE WALKING ON THE STREET
- Embargoed: 14th April 2010 13:00
- Keywords:
- Location: Greece
- Country: Greece
- Topics: Finance
- Reuters ID: LVA2CPI1H6J4P18LZ7CIU4AKPFE0
- Story Text: Greece launches seven year bond, the first after the Eurozone recently approved a safety net aid package for the country and seen as a test for Greece.
Greece turned to markets for 5 billion euros on Monday (March 29) but demand for the 7-year bond was luke-warm in the first test of investor appetite since a European-IMF debt support deal last week.
EU leaders agreed on March 25 for a rescue package for Greece, which will include the IMF, if it runs into difficulties with its massive debt, after ongoing heated debate by EU partners on whether to help the country. The issue was anticipated soon after the EU decision.
"The timing was fine, the Greek government had to test the market and its good that it did it right after the decisions that were taken last week by the European Council," said economist Gikas Hardouvelis.
Order levels on the new bond stood at around 7 billion euros with about 175 institutions bidding for a slice, sources at the lead managers said with one blaming the looming Easter holiday.
Greece drew interest from over 400 investors in a 10-year bond issued earlier this month but such appetite has cost it dearly in terms of interest rates.
Guidance on the bond was set around mid-swaps plus 310 basis points, lead underwriters said, still around levels which Greek officials have said are "unsustainable" for the state's finances in the long run.
"It is Easter week in Greece and Europe and this explains why demand may seem a bit softer, with the book growing at a slower pace compared to the previous 10-year bond issue," a dealer at a Greek bank said.
Confidence in Greece as a borrower has been badly shaken by a 300 billion euro ($403 billion) debt pile that exceeds the country's 240 billion euro economic output and by revelations that the extent of its budget problems had not been reported.
Greece, rated A2 by Moody's and BBB+ by Fitch and Standard & Poor's, has about 23 billion euros worth of bonds -- equivalent to almost 10 percent of its gross domestic product -- maturing between now and the end of May.
Some obligations could be met from cash reserves of 7 billion euros, debt agency chief Petros Christodoulou has said, leaving him at least 16 billion euros to raise in the coming weeks during a debt crisis that has shaken global markets.
PDMA said it had mandated Alpha Bank, Emporiki Bank, ING, Bank of America Merrill Lynch and Societe Generale for the 7-year bond, its third syndicated issue so far this year. Christodoulou declined to say how big the bond would be but told Reuters he hoped it would be of benchmark size. Underwriters said the government was looking to raise 5 billion euros.
Before the announcement, the 10-year Greek/German yield spread tightened 4 basis points to 311 basis points, according to Tradeweb data. That was better than 323 basis points ahead of Thursday's deal offering the prospect of a last-resort bailout and well below a January peak of 405 but means Greece is still paying interest rates on new issues about twice those of Germany.
The current Greek 7-year benchmark bond <GR7YT=RR> with a coupon of 4.3 percent is yielding 6.01 percent.
"Interest rates are still high, I think it will take some time for the market to absorb the results of that decision, right now they discount the decision but I think the decision means a large drop in spreads, because they are talking about adding a risk premium, a reasonable risk premium on European average interest rates. European average interest rates are at most 100 basis points above German rates if you add a risk premium of say 100 basis points for Greece, that brings you up to 200 - no way its not 300 - so I expect the spreads to decline over time, and the markets are going to focus on the government efforts to actually put a lid on the deficit," said Hardouvelis.
Earlier this month Greece raised 5 billion euros through a 10-year bond that was priced at 300 basis points over mid-swaps and was more than three times oversubscribed with demand reaching over 16 billion euros from more than 400 investors.
So far this year it has raised about 18 billion euros out of a 53.2 billion euro projected need for 2010. - Copyright Holder: REUTERS
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