Greece has sealed its first 30-year bond deal since 2008, highlighting the country’s sharp change in fortunes from its debt troubles a decade ago.
The bond issue, which raised €2.5bn, underscores how Greece has rebuilt its access to public markets after it became the centre of the eurozone debt turmoil that followed in the wake of the 2008-09 global financial crisis.
The 30-year sale attracted €26bn in investor orders, allowing underwriters to set a price at the tight end of the initial guidance, at 1.5 percentage points over a key benchmark known as the mid swap rate. The new bond priced at a yield of 1.956 per cent.
“The 30-year is a step back into normality in terms of the global government bond markets,” said Asif Sherani, head of DCM syndicate Emea at HSBC, which co-managed the deal.
The European Central Bank restarted its purchases of Greek sovereign debt last year when it lifted a block on buying sovereign bonds rated below investment grade with the launch of its pandemic emergency purchase programme (PEPP).
“All boats have been lifted by the ECB,” said Konstantin Veit, portfolio manager at Pimco. “There has been some upward pressure on yields but it is not obvious that all fundamentals pushing yields down have disappeared at this stage.”
Reza Moghadam, chief economic adviser at Morgan Stanley, echoed that sentiment, saying: “It really shows the level of support from the ECB that is enabling governments to issue at the moment on favourable terms.”
The ECB last week promised to accelerate the pace of bond purchases under its €1.85tn PEPP scheme to counter the recent rise in bond yields, which officials worry could hamper the eurozone economy’s stuttering recovery.
“After last week’s ECB meeting there is more firepower on the way, so it is a perfect time for Greece to issue,” said Moghadam.
Wednesday’s new issue follows a string of successful deals for Greece in recent months. A 10-year sale in January drew €29bn in orders for €3.5bn of debt. The robust demand was reflected in the price, with a yield of 0.8 per cent for the new bond. The country also raised a total of €12bn from five new bond offerings in 2020.
“Greek bonds have generally recovered from the losses we have seen in the financial crisis and the eurozone sovereign crisis,” said Francesco Maria Di Bella, fixed-income strategist at UniCredit.
Greek debt has endured a bout of selling in the past month alongside other government bond markets. The yield on the country’s 10-year note stands at 0.9 per cent, up 0.3 percentage points this year, but well below the roughly 4 per cent recorded at the peak of the Covid-19 crisis last year. Yields rise when prices fall.
“Essentially we have just been waiting for a bit of stability and we got that this week. Greece is by no means unique and has been impacted by recent rates moves alongside other sovereigns,” said Sergey Sudakov, head of DCM, central and eastern Europe, at BNP Paribas, which co-managed Wednesday’s transaction.
The gap between Greek 10-year bonds and the equivalent German Bunds widened during the bond market sell-off in late February. The spread, which is considered a gauge of the riskiness of the country’s debt relative to ultra-safe Bunds, rose to 1.37 percentage points up from 1.23 points at the beginning of the year. The risk gauge narrowed last week as the ECB offered fresh reassurance to the market.