Greece is planning to announce a sale of five-year notes via banks tomorrow, according to two people familiar with the matter, as the country that sparked Europe’s sovereign debt crisis returns from a bond-market exile.
Greece plans to raise 2 billion euros ($2.76 billion), said the people, who asked not to be identified because the arrangements are private. The country may increase the size of the sale, depending on demand, one of the people said. Finance Minister Yannis Stournaras told reporters in Athens last week that the country was planning a “small issuance of bonds, three- or five-year bonds, in the first semester.”
After a mounting debt load saw it shut out of bond markets, the Greek government has been kept afloat with international bailout loans since 2010. The nation’s bonds have led a rally of securities from Europe’s most indebted nations this year as investors returned to markets they shunned amid concern the currency bloc would splinter.
“They’re taking advantage of the improved confidence in Europe,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “It’s a good demonstration of how things have improved. Of course not everything’s been solved.”
Greek securities returned 30 percent this year through yesterday, the best performance among sovereign-debt markets tracked by Bloomberg World Bond Indexes.
The yield on benchmark Greek 10-year (GGGB10YR) debt was at 6.16 percent at the 5 p.m. London close. It dropped to 6.12 percent yesterday, the lowest since March 2010 and down from as much as 44.21 percent in 2012.
Investors are returning to fixed-income, currency and derivatives markets as the sovereign-debt crisis that nearly broke the euro shows signs of fading. European Central Bank President Mario Draghi has pledged to backstop the region by buying the bonds of distressed nations if they request aid.
Greece set off Europe’s debt crisis in 2009 when the government revealed its budget deficit had ballooned to more than five times the euro area’s permitted limit. It received two bailouts and has been shut out of bond markets since March 2010.
“The crisis may not be fully over, but the need for yield is still strong,” saidAndrew Brenner, the head of international fixed income in New York for National Alliance Capital Markets, said in a telephone interview. “Greece has turned the corner.”
The country’s financing situation has already benefited from a budget surplus before interest costs of almost 3 billion euros, which the government expects the European Union’s statistics agency to confirm this month.
The European Commission forecasts that Greece’s gross domestic product will expand 0.6 percent this year before accelerating 2.9 percent in 2015. The country has lost about a quarter of its economic output in the recession that started in 2008, after the Greece carried out the biggest sovereign restructuring in history two years ago.
Standard & Poor’s last month maintained Greece’s credit rating at B-, six steps below investment grade, saying the country’s debt remains large even as its fiscal performance improves. Its ratio of debt to gross domestic product is forecast by the European Commission to be 177 percent this year, the highest in the European Union.
To contact the reporters on this story: David Goodman in London at email@example.com; Anchalee Worrachate in London at firstname.lastname@example.org; Nikos Chrysoloras in Athens at email@example.com