Ready for bond mar­kets again

Financial Mirror (Cyprus) - - FRONT PAGE -

Greece is con­sid­er­ing an­other bond trans­ac­tion, maybe even this week, hav­ing suc­cess­fully tapped mar­kets in April for the first time in four years.

The first bond is­sue on April 10 was a 3 bln euro, 5-year note in a syn­di­cated sale that was heav­ily over­sub­scribed. The yield was 4.95%. Ac­cord­ing to daily Kathimerini, the govern­ment is now plan­ning a 3-year bond is­sue with the aim of rais­ing 2.5 – 3 bln eu­ros by Thurs­day. The pro­ceeds may be used as a cush­ion for debt ma­tu­ri­ties amount­ing to 5.6 bln eu­ros in Au­gust.

The in­dica­tive timetable is sub­ject to the ap­proval of the next sub-tranche of 1 bln eu­ros by the up­com­ing Eurogroup, that ar­rived on Mon­day in the form of EFSF fund­ing, as Greece has com­pleted the six prior ac­tions re­quired.

The troika del­e­ga­tion is sched­uled to re­turn to Athens on Wed­nes­day and Greece’s goal is for the bond trans­ac­tion to take place as early as pos­si­ble to avoid any neg­a­tive reper­cus­sions dur­ing the in­spec­tion by the in­ter­na­tional lenders af­fect­ing in­vestor in­ter­est or the yield.

The govern­ment aims to ben­e­fit from the cur­rent low in­ter­est rates as well as pos­i­tive in­vestor sen­ti­ment on the prospects of the Greek econ­omy.

The lat­est budget ex­e­cu­tion data showed that the budget bal­ance out­per­formed tar­gets by more than 500 mln eu­ros to May. In ad­di­tion, rev­enues re­bounded in May, beat­ing the 5-month tar­get by 142 mln from a short­fall of 620 mln to April.

Strong tourism is set to sup­port the an­tic­i­pated GDP re­bound of 0.6% this year with 5-month in­ter­na­tional ar­rivals post­ing a 20.4% rise, while travel re­ceipts surged by 27.8% to April. In ad­di­tion, eco­nomic sen­ti­ment soared 4.6 points in June to 103.7 reach­ing its high­est level since April 2008.

Fol­low­ing the Pri­vate Sec­tor In­volve­ment (PSI) in early 2012, the new Greek Govern­ment Bonds (GGBs) in is­sue have ma­tu­ri­ties start­ing from 2023, which means there is lack of short-term ma­tu­ri­ties. Bond is­sues with 3- to 7-year ma­tu­rity would build up the yield curve. The first is­sue had a 5year ma­tu­rity and this is now be­ing fol­lowed by a 3-year trans­ac­tion, while the next will re­port­edly in­volve a 7-year bond.

A re­cent WSJ re­port quot­ing a Com­merzbank strate­gist noted that “this scarcity value should con­tinue lend­ing

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