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Early repayment of expensive IMF loans has been a longstanding ambition of the Greek government, as it seeks to bring down its debt refinancing costs. Talk of the plan comes as the country moved closer to fulfilling a first set of post-bailout commitments, which will likely allow for the disbursement of some 1 billion euros ($1.12 billion) in aid at a meeting of euro-area finance ministers on Friday.

Prime Minister Alexis Tsipras’s government hasn’t so far submitted any formal request to the IMF to make an early repayment, but the government is exploring such a step, according to two Greek officials, who spoke on condition of anonymity as the plans are not yet final.

Greece and its creditors struck a landmark deal last summer to ease the repayment terms for part of the nation’s mountain of debt, which nonetheless still stands at around 180 percent of its gross domestic product. Repaying the IMF early would reduce Greece’s debt obligations for the coming years since part of these loans are more expensive than both the bailout funds it has received from the euro zone and even the country’s cost of new borrowing from the markets.

The move could also help boost Tsipras’ political capital ahead of a general election this year, as it will add to signs that the economy is stronger and that the country can start weaning itself off its creditors. This will also allow the premier to claim he has reduced the IMF’s exposure to Greece and thus reduced the need for its oversight.

Waiver Needed

The repayment will first require a green light from the euro area. That’s because, as creditors to Greece, other euro-area countries must waive their right to be paid back early by a proportional amount. This waiver has been granted in the past to former bailout countries such as Ireland and Portugal.

EU officials say Greece hasn’t so far made any official request to repay the IMF early. But even if it does, it is not a given that the euro zone will be on board.

That’s because some countries could be skeptical about whether the early repayment would be financially beneficial for Greece rather than just replacing official debt with still-pricey borrowing from the markets. As well as needing to show that the savings in debt servicing costs from this swap would be significant, Athens may also need to prove to its creditors that its plans for economic overhauls remain ambitious.

Countries such as Germany, which insisted on the IMF’s participation in the Greek rescue program, may hesitate to approve a step that will minimize the fund’s involvement, officials say. Such nations have in the past sought the IMF’s participation as a seal of credibility for the Greek bailout.

Read More: Germany Rejects Greek Plan to Repay IMF Early: Handelsblatt

What’s more, the government’s latest delays in fulfilling the conditions attached to its post-bailout review, including a prolonged spat over a household insolvency framework may spook creditors, who worry about its impact on the Greece’s troubled banks and fear it may be a harbinger of profligate behavior ahead of this year’s national elections.

• The deal attracted the week’s largest orderbook by both volume and subscription level, allowing the sovereign to cut 22.5bps from the initial price talk
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Corporates

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SSA

The country plans to open the books on a syndicated offering of at least 2 billion euros ($2.3 billion) of bonds after announcing Monday it hired banks for the sale, according to a person familiar with the matter, who asked not to be named because the details aren’t final yet.

Prime Minister Alexis Tsipras, facing a general election this year that polls show he’s set to lose, has pointed to bond sales as proof the country has turned a corner after its economy shrank by a quarter during the crisis.

After ending its bailout program last summer, Greece tapped the market for 2.5 billion euros of five-year bonds in January. The success of that sale, the country’s first in almost a year, paved the way for the 10-year issue.

Following the Tuesday sale, Greece will be almost two-thirds of the way to meeting its 2019 goal of raising as much as 7 billion euros this year.

Greek stocks and bonds have rallied this year, with the Athens Stock Exchange up more than 15 percent and the yield on benchmark 10-year government bonds down below 3.7 percent. The yield peaked at about 37 percent at the height of the debt crisis in 2012, just before Greece defaulted on its debt to private-sector creditors.

The country last sold 10-year bonds in March 2010, with a 6.25 percent coupon, as the country was in the eye of a storm after a new government revealed that its predecessor had hidden the true size of its budget deficit.

While it issued similar maturity debt in 2017, that was part of an exchange for bonds that were part of its debt restructuring.

Greece’s travails opened a new chapter in the global financial crisis, and two months later it entered the first of three bailouts from the euro area and International Monetary Fund.

For other euro-area countries like Ireland and Portugal that followed Greece in having to take bailouts, issuing 10-year debt was seen as a key staging post in the journey to regaining economic sovereignty.

Moody’s Investors Service on Friday raisedGreece’s sovereign credit rating two steps to B1 from B3. Although that’s still four levels below investment grade, it gave a fresh boost to the government’s bond-selling plan following European Commission criticism that the government was dragging its feet on key economic reforms.

The country’s long-term foreign currencydebt was upgraded to B1 with a stable outlook from B3, Moody’s said in a statement on Friday. The new ranking remains four levels below investment grade.

“The ongoing reform effort is slowly starting to bear fruit in the economy,” Moody’s said. “While progress has been halting at times, with targets delayed or missed, the reform momentum appears to be increasingly entrenched, with good prospects for further progress and low risk of reversal.”

Greece exited its international bailout last summer, though foot-dragging on some key economic reforms is raising creditor concern and putting at risk a planned debt relief measure this month. The government is planning to tap the markets once again, after a successful sale of five-year bonds in January, most probably with a new 10-year bond this month, given that appetite for Greek risk among investors remains strong.

The country’s stocks and bonds have risen this year, with the Athens Stock Exchange index up about 16 percent since the start of 2019. The yield on benchmark 10-year bonds is now below 3.7 percent, compared with a peak of about 37 percent at the height of the debt crisis in 2012, when Greece defaulted on its debt to private-sector creditors.

“The most politically painful measures have already been enacted, with the economy finally showing signs of recovery, reducing the incentives for any future government to jeopardize the hard-won gains,” the rating company said. “The stable outlook balances the relatively low risk of policy or fiscal reversal against the limited upside to Greece’s credit profile.”

The upgrade is the first time in more than a year that Moody’s has changed Greece’s rating. Fitch Ratings upgraded the country to BB- in August, while S&P Global Ratings rates the country B+. Each is below the junk threshold.