Bond issue is shelved for now
Gov’t decides to wait for the IMF’s debt sustainability analysis and the impact it will have on the markets
The government is freezing its plans for a bond issue that was scheduled to take place yesterday or today. Following a series of meetings over the weekend, it decided to delay the trial return to the markets until the International Monetary Fund publishes its debt sustainability analysis (DSA).
Government sources responded yesterday to reports about the issue being “a matter of hours,” saying that “no such decision has been made.” The government is closely monitoring developments in the bond markets and will decide about the most appropriate time for its return, “not based on rumors but exclusively on the optimum management of the Greek public debt,” they said.
The original plan, according to what IMF Managing Director Chris- tine Lagarde had said, provided for the Fund’s Executive Council to convene on July 27 so as to decide on the IMF’s participation in principle in the Greek program. It would also issue its DSA. The Fund, however, later brought forward the meeting to this Thursday.
Therefore, given that the space of time between the bond issue and the DSA would have been just a few days, it was deemed appropriate to delay the trial issue in respect of the in- vestors, and the credibility of the country and the process.
What impact the DSA will have on the markets remains unknown. It will obviously surprise no one that the Greek debt will be deemed unsustainable. What will be rather surprising will be the fact the Fund is not changing anything regarding its estimates about growth rates, primary surpluses or Greece’s capacity to promote reforms and benefit from them, compared to its previous 1.1462 analysis in February. There will therefore be no sign of the convergence with the eurozone that Lagarde referred to on June 15.
Despite the issue’s delay, the markets continued to raise the price of the existing Greek bonds, probably preparing further for the upcoming swap of the debt maturing in 2019 with new five-year paper. The paper issued in April 2019 saw its yield slide further, to 3.35 percent yesterday, from 3.39 percent on Friday.