Bond is­sue still pos­si­ble

Calm mar­ket re­ac­tion after IMF re­port means Athens may tap mar­kets this week

Kathimerini English - - Front Page -

The calm re­ac­tion of the mar­kets to the In­ter­na­tional Mon­e­tary Fund’s stance on Greece means that the gov­ern­ment’s plans for a trial bond is­sue may be re­vived this week.

Even though the Fund high­lighted in its debt sus­tain­abil­ity anal­y­sis that Greece needs re­lief, in­vestors did not ap­pear alarmed. The yield on the five-year Greek bond, which ma­tures in 2019, was 3.34 per­cent, which is the low­est it has been since it was is­sued in 2014.

The IMF’s as­sess­ment ap­peared par­tic­u­larly pes­simistic about the Greek econ­omy’s prospects with­out se­ri­ous debt re­struc­tur­ing from the Euro­pean lenders. The Wash­ing­ton­based or­ga­ni­za­tion be­lieves that Greece will not be able to grow by more than an aver­age of 1 per­cent of GDP per year in the long-term. The IMF also has doubts that Greece can bor­row from the mar­kets at a sus­tain­able rate. It fore­casts that it will be is­su­ing bonds with a yield of 6 per­cent after the end of the bailout pro­gram next year.

“One could say that it is try­ing to make its par­tic­i­pa­tion [in the pro­gram] so ex­pen­sive for the Euro­peans so that they ask it to leave,” a Greek gov­ern­ment of­fi­cial told Kathimerini.

The IMF’s as­sess­ment, though, does not ap­pear to have shut the door on the pos­si­bil­ity of the gov­ern­ment is­su­ing a bond, pos­si­bly as early as to­day. This could give Athens the chance to go to the mar­kets again later this year, pos­si­bly after the Ger­man elec­tions in Septem­ber and be­fore the start of the third pro­gram re­view.

The in­put from the Fund, which in­cludes a sug­ges­tion that the low­er­ing of the tax-free thresh­old should be moved for­ward a year to 2019, in­di­cates that the the third re­view could prove a pro­longed process.

Ac­cord­ing to gov­ern­ment of­fi­cials, the re­view will prob­a­bly be­gin to­wards the end of Oc­to­ber or in early Novem­ber and will con­clude when the gov­ern­ment has im­ple­mented the prior ac­tions and the Euro­pean lenders have de­cided what, if any, role the IMF will have.

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