Gov’t should wait before issuing new 10-year bond, analysts say

Greece’s 10-year bonds continue to entail significant risks, funds and analysts tell Kathimerini, recommending shorter maturity securities instead.

They also note that a new short-term bond issue would get a better reception from the market, while warning that the government should not rush to the capital markets for political or other reasons in what remains a difficult environment.

After the reserved tone the government and Public Debt Management Agency officials were met with in their London meetings a few days ago, Finance Minister Euclid Tsakalotos will attempt in new meetings in the US and Asia soon to convince investment funds about the country’s growth prospects. This forms part of an effort to broaden the investment base, keeping in mind the possibility that Greece will tap the capital markets, even though this is not necessary in cash terms for now.

The cash buffer may be enough to cover the country’s needs for the next couple of years, but the return to “normality” that the government aspires to and the successful tapping of the markets require constant contact with investors.

However, according to Algebris, the government must wait for the markets to become stable again before issuing a new bond. Algebris was one the 25 funds and banks that Alternate Finance Minister Giorgos Houliarakis met with in late June in London. The fund’s head of Global Macro Strategies, Alberto Gallo, tells Kathimerini that although most analysts consider the five-year bonds attractive as they are protected by the cash buffer and the 10-year loan extension Greece was granted last month, he considers them rather expensive of late, in contrast to seven-year debt that remains quite cheap, their yield dropping below that of their issue in February.

As for the 10-year or longer bonds, they still contain risks due to the fact that the issue of the Greek debt’s long-term sustainability has yet to be resolved, which would have been the case had the so-called French mechanism been adopted, he notes.

Jens Peter Sorensen, chief analyst at Danske Markets, adds that looking at the Greek yield curve, the five-year bond is the “sweet spot,” taking state securities’ risks into account. It makes more sense for investors to buy that instead of a 10-year one, therefore Athens should wait, he stresses.