Seven-year bond issue by February 15

The Greek state is soon set to test the money markets for the first time this year through a seven-year bond issue, expected in the next couple of weeks, with the aim of raising 3 billion euros.

Reuters confirmed the news, citing senior government sources; a government official stated that a final decision has yet to be reached on the specific day of issue, but added that two more issues will follow by the end of the summer.

The yield of the Greek benchmark 10-year bond declined to 3.62 percent on Monday, its lowest level since January 17, 2006. The five-year bond yield fell to 2.65 percent and the two-year paper’s to 1.25 percent. The spread between the 10-year yield and the German equivalent shrank to 294 basis points – 12 months ago it had amounted to 702 bps.

The drop in Greece’s theoretical cost of borrowing is attributed to the completion of the third bailout review and the constant upgrading of the country’s credit rating within 2018: After the recent one-notch upgrade by Standard & Poor’s, Fitch is set to follow on February 16, Moody’s is next on March 30, and S&P will review the country’s rating again on July 30. After the end of the bailout program, Fitch will issue its next report on August 20 and Moody’s will offer the year’s final review on September 21.

Kathimerini understands that after the issue of the seven-year bond – by February 15 at the latest – the Public Debt Management Agency is planning to issue a three-year paper and 10-year debt by August 18, when the program expires, to form part of the so-called cash buffer of 19 billion euros planned.

However, Bruegel think tank chief economist Zsolt Darvas warned of the risk associated with Greece staging a full return to the markets without the national debt first being considerably eased.

He said that “if Greece obtains a considerable debt easing, this will be seen positively by the markets, but if the debt easing is not sufficient, I would be particularly concerned… I see considerable risks.”