Greece Takes Step to Normalcy With Bond as Bailout Nears End

Updated on
  • Country to price seven-year bonds to yield-hungry markets
  • Debt relief discussion and a new monitoring scheme to come
Photographer: Yorgos Karahalis/Bloomberg

Greece will sell 3 billion euros ($3.7 billion) of seven-year bonds in another step toward exiting a bailout program in August that has kept the nation afloat.

The offer for the 2025 notes will price to yield 3.5 percent, inside an initial target of about 3.75 percent, people familiar with the matter said, asking not to be named because they’re not authorized to speak about it. Investor orders for the sale topped 6 billion euros, the people said. Barclays Plc, BNP Paribas SA, Citigroup Inc and JPMorgan Chase & Co. and Nomura Holdings Inc are the bookrunners for the bond.

“It’s a good yield relative to their other issues and this is probably why the rest of the Greek curve is struggling,” said Nicholas Wall, a portfolio manager at Old Mutual Global Investors. “Some investors will be switching out of other Greek government bonds into the new seven-year.”

The government aims to create a cash buffer of about 20 billion euros by the time its bailout program ends in August, of which half will come from markets and the rest from European Stability Mechanism bailout funds. It also plans three-year and 10-year offerings in the coming months as it tries to cement its bond market recovery from a 2012 debt restructuring by rebuilding a yield curve.

Testy Market

Market turmoil this week delayed the issue after the government announced it on Monday. Greek government bonds fell on Thursday, with the yield on the 10-year benchmark rising 9 basis points to 3.78 percent at 4:30 p.m. in Athens.

“Pricing is higher today than it would have been one or two weeks ago,” said Dimitris Dalipis, head of fixed income at Alpha Trust Mutual Fund Management SA in Athens. “But Greece wants to bring a deal and test the market. Things in Greece seem to be improving but there are still a lot of uncertainties.”

The Greek government is now turning its attention to discussions on further debt relief and post-bailout arrangement for the country. Finance Minister Euclid Tsakalotos has said Greece expects a different kind of monitoring from its bailout lenders that will focus on achieving agreed targets, and not micromanaging how the country will meet them.

At the same time, Greece’s international creditors are trying to find common ground on their debt sustainability analyses, as there are still different estimates for the debt trajectory between European institutions and the International Monetary Fund.

— With assistance by Eleni Chrepa, Paul Tugwell, and Leo Laikola

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