EU’s take on a successful Greek return to bond markets

Greece’s imminent return to markets will be a step towards a successful exit from its eurozone-funded bailout program, but it will not be an overnight change.

The process, European Union officials say, will require a series of successful bond sales and the build-up of a “sizable” cash buffer.

Eurozone creditors are keen to see Athens develop a strategy to tap the markets well before the end of its current 86-billion-euro financial aid program, so that when the bailout expires in August 2018 the country will be more likely to stand on its own feet.

But at the same time, there is concern about potential Greek complacency or backtracking that could necessitate an extension of financial support and continued monitoring of Greece’s reforms.

Three EU officials, asking not to be named, told Reuters that Athens’s first task should be to refrain from any hints about retreating from agreed reforms. That would increase instability, especially as the country comes under markets’ close watch again.

A return to markets is on the cards soon. Investors expect Greece to raise at least 3 billion euros in five-year bonds once its benchmark borrowing costs drop below 5 percent, a level it is fast approaching.

It would be the country’s first borrowing since 2014 when it briefly returned to markets with two issuances before plunging again into financial trouble. In that sale, it raised in the first issuance 3 billion euros with five-year bonds yielding 4.95 percent.

Who buys the bonds will also be key for Greece. To be deemed successful, one eurozone official said, a new sale should attract mostly foreign capital, with only minimal participation of the country’s banks.

[Reuters]