Corporate bond yields tumble

The cost of borrowing for Greek listed companies has plummeted more than 70% since the outbreak of the coronavirus pandemic, as reflected in the yields of their bonds trading on the Athens Exchange and in foreign markets.

In about three-and-a-half months since the peak of the Covid-19 health crisis in midMarch, corporate bonds have managed to considerably reduce their losses from the international sell-off.

The rally of Greek state bonds, from 4 percentage points on March 18 for the 10-year bond to 1.19 percentage points yesterday, has also brought the borrowing costs of the state down by 70%. This, combined with the new bond issues in April and June, benefited corporate bonds too, decisively reducing the pressures they had suffered.

Additionally, it whet the appetite of listed companies for new corporate issues, such as those by GEK Terna, Titan Cement and Lamda Development that target low interest rates.

Analysts note that Greece’s participation in the European Central Bank’s new bond-buying (QE) program and the drop in rates have had a significant impact on company valuations.

Since March the bonds trading on the Greek market have shown a major improvement: For instance, Housemarket’s bond, which was trading at 7.8% at the peak of the sell-off, has now dropped 66% to just 2.63 percentage points. Likewise, that of Attica Holding has seen its yield tumble 52%, B&F’s has fallen 45%, Aegean Air’s by 43% and GEK Terna’s by 36%.

With the exception of Intralot, Greek companies’ bonds trading in international markets have also had a positive trajectory. Titan has seen the yield on its debt expiring in 2024 drop 73% from March; it is currently trading at 100.52% of its nominal value. The yield on OTE telecom’s bond has tumbled 68%, the same as that on those issued by Hellenic Petroleum and Mytilineos. Coca-Cola HBC’s bond, which matures in 2029, has seen its yield cut in half. Even the high-yield green bond of construction company Ellaktor has experienced a rate drop from 13.7 to 10.7 percentage points.

Analysts note that the inclusion of Greece in the emergency bond-buying (QE) program of the European Central Bank and the drop in rates have had a significant impact on company valuations, thereby slashing their corporate bond yields in the last three-and-a-half months.