Ready for bond markets again

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