Market sees no point in Greek bond issue before next spring

The government should avoid tapping the money markets for at least another five months and aim at short-term paper rather than a benchmark issue, says Gianluca Ziglio, senior fixed income analyst at Continuum Economics.

“The window for issuing bonds this year may have already closed due to the recent turmoil and also the approach of the end of the year, when banks and investors tend to reduce their risk exposures,” Ziglio tells Kathimerini. “Greece could, perhaps, plan on getting back into the primary market in the second quarter of 2019, as Q1 will likely see strong competition from the usually heavy issuance from all other eurozone countries, which may not help Greece’s issuance plans.”

Greece needs time to rebuild a relationship with its investor bases as it has been out of the markets for a while now, says Ziglio. He added that past issuances such as the 5-year bond of April 2014, “did not perform well after launch because Greece became involved in a strong confrontation with its creditors in 2015 that risked leaving the country without financing, possibly leaving some investors scarred by that episode.”

“This is in contrast with the far more successful experience of the launch of the 5-year bond issued in 2017, which fared much better in the market also because it took place while Greece was in the program and therefore benefited from a funding backstop by the ESM (which this time Greece does not have as it can only rely on the availability of the cash buffer),” he says.

Ziglio also argues that it might be easier for Greece to issue at shorter maturities to begin with and “progressively crowd in investors by issuing at longer maturities.”

“For instance, in 2021 the amount of debt due is still low and such maturity is within the horizon in which gross financing needs are covered by the cash buffer, therefore reducing the credit risk for investors. A 2024 maturity could also be viable as there is much less debt coming due in 2024 than in 2022, 2023 and 2025.”

Another idea would be to launch a multi-tranche issue (for instance, a 5-year bond due in 2024 simultaneously with a 10-year bond due in 2029 via syndication), “combining both shorter and longer dated debt in order to segment the funding market and allow investors to choose the segment they are most comfortable investing in,” concludes Ziglio.