Why Greece’s market forays could start with a 15-year bond in 2022
Greece’s debut on the bond markets in 2022 appears to be a matter of days, in a year when the borrowing strategy of the Public Debt Management Agency will once again be front-heavy: Some 75-80% of the 12 billion euros Athens intends to raise for the entire year will come from issues during the first six months.
Given that the European Central Bank’s PEPP bond-buying program runs to end-March, so purchases of Greek bonds will be higher than during the reinvestments program starting in April, this first quarter of 2022 will be the busiest for the PDMA.
Recent pressure on Greek bond prices – as with other sovereign debt papers – that has prevented an earlier market foray does not seem to concern the Finance Ministry, “as long as the yields do not exceed 3% – i.e. the average long-term cost of borrowing,” according to a source. After all, international agencies have also forecast that 2022 will be a year of borrowing cost increases globally, partly due to the monetary policy swing.
Market experts say the first market foray will likely concern a benchmark 10-year issue for a typical and safe launch into 2022, as the PDMA has tended to do recently. That is also the expectation for January by analysts at Citigroup, JPMorgan, Danske Bank and DZ Bank. Still, the 10-year bond issued a year ago had a yield of 0.81%, a historic low, while its interest today (as a nine-year paper) tops 1.5%, which means that the yield of a new 10-year issue will be more than twice as high as last year’s. Consequently, if the ministry wished to broadcast a signal about Greece’s cost, such an issue would not be the main choice.
Given the above, a 20-year issue might be a better option, following the example of Portugal, offering a relatively high premium for a new issue. Societe Generale analysts Ninon Bachet and Sean Kou told Kathimerini that they expect Greece’s first foray this year to concern a 15- or a 20-year bond, more likely through the reissue of the 15-year paper dating since 2020. That was issued with an interest of 1.91%, and its yield (as a 13-year paper maturing in 2035) currently stands at 1.67%.
On the other hand, the PDMA usually tends to make its year debut in the market with a new benchmark bond and not by reopening previous issues.
