EU’s take on a suc­cess­ful re­turn to bond mar­kets

Kathimerini English - - Focus -

BRUS­SELS (Reuters) – Greece’s im­mi­nent re­turn to mar­kets will be a step to­wards a suc­cess­ful exit from its eu­ro­zone-funded bailout pro­gram, but it will not be an overnight change. The process, Euro­pean Union of­fi­cials say, will re­quire a se­ries of suc­cess­ful bond sales and the build-up of a “siz­able” cash buf­fer. Eu­ro­zone cred­i­tors are keen to see Athens de­velop a strat­egy to tap the mar­kets well be­fore the end of its cur­rent 86-bil­lioneuro fi­nan­cial aid pro­gram, so that when the bailout ex­pires in Au­gust 2018 the coun­try will be more likely to stand on its own feet. But at the same time, there is con­cern about po­ten­tial Greek com­pla­cency or back­track­ing that could ne­ces­si­tate an ex­ten­sion of fi­nan­cial sup­port and con­tin­ued mon­i­tor­ing of Greece’s re­forms. Three EU of­fi­cials, ask­ing not to be named, told Reuters that Athens’s first task should be to re­frain from any hints about re­treat­ing from agreed re­forms. That would in­crease in­sta­bil­ity, es­pe­cially as the coun­try comes un­der mar­kets’ close watch again. A re­turn to mar­kets is on the cards soon. In­vestors ex­pect Greece to raise at least 3 bil­lion eu­ros in five-year bonds once its bench­mark bor­row­ing costs drop be­low 5 per­cent, a level it is fast ap­proach­ing. It would be the coun­try’s first bor­row­ing since 2014 when it briefly re­turned to mar­kets with two is­suances be­fore plung­ing again into fi­nan­cial trou­ble. In that sale, it raised in the first is­suance 3 bil­lion eu­ros with five-year bonds yield­ing 4.95 per­cent. Who buys the bonds will also be key for Greece. To be deemed suc­cess­ful, one eu­ro­zone of­fi­cial said, a new sale should at­tract mostly for­eign cap­i­tal, with only min­i­mal par­tic­i­pa­tion of the coun­try’s banks.

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