Bond markets beckon for Greece after years of isolation.Greece is considering tapping into international bond markets after years of financial isolation.
When exactly the market return will be remains unclear, but many officials within the left-wing administration of Alexis Tsipras suggest that Greece could issue bonds within weeks, which would be the first since an ill-fated attempt in 2014.
Yields on Greek paper have dropped dramatically, with ten-year government bonds reaching 5.7 per cent, the lowest point in two years, as investors buy in. Yields move inversely to values.
Adding to investor confidence, rescue lenders have agreed to disburse €8.5 billion in fresh bailout loans, without which Athens would have gone bankrupt, unable to repay a bond that is due this month.
At a conference, Euclid Tsakalotos said that Greece “would soon indicate” to investors the strategy for its bond market return. The aim, the finance minister explained, was not to make a one-off attempt. “We don’t want to go too early, but when we do go, we want to ensure that markets know that this is part of a sound strategy,” he said.
The British-educated minister signalled Greece’s intent to press ahead with its market return regardless of attempts to convince the European Central Bank to add Greek debt to the shopping list of securities that it can buy through its quantitative easing programme. Such a move, officials believed, would further boost investor confidence.
“It would be very useful,” Mr Tsakalotos said. “It is important, but it is mostly symbolic.”
With the country’s next large bond repayment scheduled for April 2019, yield-hungry investors are welcoming an addition to the Greek bonds that have outperformed this year. European policymakers look determined to avoid any crisis before the German elections in September.
“We have been bullish on Greece over the past year,” Mark Dowding, partner and portfolio manager at Blue Bay Asset Management in London, said. “We’ve also formed the view that lenders will remain committed to helping Greece. I feel relatively confident that Greece will be returning to market in the second half of this year.”
Greece’s bailout programme expires next year and if Athens does not regain stable access to bond markets soon, it will need a fourth rescue plan since 2010 to stay in the euro.
In addition, further austerity measures would have to be enforced on Greeks, who are already reeling from seven years of brutal budget cuts that have squeezed their incomes by at least 27 per cent. Recent protests have included a 14-day strike by rubbish collectors.
On Sunday, Wolfgang Schäuble. Germany’s finance minister, warned that the International Monetary Fund, a leading creditor in Greece’s bailout, would not join in any future rescues for Europe’s poorest member state.
That has encouraged one group of key financial advisers to urge the administration to press ahead with a bond issue this month, well before Christine Lagarde, the IMF’s managing director, presents her staff’s assessment of Greece’s debt sustainability, potentially dampening market interest.
The IMF has long considered Greek debt to be unstainable, instead favouring radical relief measures that European lenders, mainly Germany, refuse to accept.
Mr Tsakalotos has already held several meeting with market participants, including Rothchild & Co, in London in recent weeks.
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