Summer bond issue is shelved

Gov’t sources cite political unrest in Italy and say plans are postponed until after the bailout program ends

The recent political unrest in Italy is forcing Greece to freeze its summer bond-issuing plans, with Finance Ministry sources scrambling to calm investor fears that a full return to the markets in the fall might generate.

The improvement in the performance of Greek bonds in April led the Greek government to start planning its next issue, but last month’s deterioration convinced the Public Debt Management Agency (PDMA) to take a wait-and-see stance.

Since last month analysts and investment funds have told Kathimerini that a fresh attempt to tap the markets at this point, when volatility and market pressures have risen, would be the wrong move, pointing to the stumbling effort of the seven-year bond issue last February. Economists have told Kathimerini that Athens’s “clean exit” plans are now being reversed and that a precautionary credit line would be the best option.

Government officials told Reuters yesterday that plans for a new bond issue will have to wait until the fall, when Greece hopes to have an agreement on the further easing of its debt.

“We examined the possibility of a bond issue before the end of the bailout but after the recent turbulence it is not going to happen,” one official stated. “Having a strong liquidity buffer, we can wait until the post bailout period before making our next move. On top of that, there will be a decision on debt relief,” another official noted.

Finance Ministry sources tried to ease possible concerns resulting from the Reuters report, noting there is no issue postponement as “for such a thing to exist, there should first be a decision for an issue, and that has never been the case.”

They added that “the government has issued the PDMA with a general order since last summer to perform – as it already has done – some trial issues. The PDMA decides on bond issues on technical criteria, possessing the necessary experience and know-how to pick the right time. The government is not into impression politics through bond issues, as previous administrations used to do.”

Yesterday the yield of the benchmark 10-year bond rose 2.11 percent in reaction to the report and the Tbill auctions of 13- and 26-week debt saw increased interest rates.