Huge success in 5-year issue
New bond secures considerable bids, brings in 2.5 billion euros on reduced interest
The decision of the Public Debt Management Agency to tap the markets at the exact moment the pre-election period begins and to capitalize at the same time on the improvement that has occurred in the bond market, which is seen as a safety net for investors amid the still-simmering banking crisis, turned out to be absolutely correct.
Demand for the new five-year bond issued on Wednesday was particularly strong and topped 19.1 billion euros, confirming that investors continue to view Greece as a safe and profitable bet and see no risk to fiscal stability ahead of the elections.
The Greek state raised €2.5 billion from the issue, covering over 85% of the total loan needs of 2023 from the first quarter of the year, following the €3.5 billion raised with the 10-year bond in January.
The five-year interest rate stood at 3.93% (slightly lower than the original guidance of 3.97%). However, thanks to the active portfolio management strategy the PDMA has implemented in recent years, managing to overcompensate the interest rate risk (over-hedging), the real cost for the Greek state from the new issue is 1.83% – i.e. 2.1% lower.
The option of issuing a five-year bond was the safest one at present. The European Central Bank’s monetary tightening and the shifts in expectations around it have caused significant volatility in eurozone bonds; however, Greece’s five-year note has shown the most resilience, with limited volatility.
As Antoine Bouvet, chief analyst at ING, noted to Kathimerini, “Greek five-year bonds have reversed their recent underperformance relative to Italy, which is an indication that the markets saw the new issue very positively, which is also proven by the healthy demand for it. The five-year was probably a more conservative choice than a longer-term, but PDMA had already issued a benchmark bond in January [10-year].”
According to Bouvet, the release was a complete success, given that it took place between the banking turmoil internationally and the announcement of the Greek election date.
