Corporate bonds put on ice until market turmoil eases off

This year began with high expectations for Greek corporate bond issues after the benchmark of the Athens Exchange rallied close to 1,000 points and 10-year state bond yields dropped to 12-year lows. However, unrest on international markets in February, the Italian political crisis, concerns over Greek banks and worries about Greece’s post-bailout prospects after the government opted for the so-called “clean exit” led to some of those plans being frozen or canceled.

Market jitters forced investors to seek higher bond yields, forcing Greek companies to find other sources of funding or wait until the dust settles. Some have chosen to sit tight until there is greater visibility in local politics, ahead of next year’s general election.

NBG Pangaea announced an issue of 400 million euros back in May, but called it off a few days later due to the plunge in Italian bonds that also affected Greek securities. Sources from the property investment firm say the issue will now depend on the timing of the election. Aegean Airlines has also chose to wait, having recently shelved the issue of a seven-year bond worth 200 million euros; it intends to wait until the Italian concerns subside to reduce the investment risk. Public Power Corporation, too, will wait for a more favorable international climate before its issues its planned 500-million-euro bond.

Greek corporate bonds have had a rather good year, resisting strong pressures that have weighed on state bonds, as corporate prospects play a significant role in attracting a special group of investors. However, the mounting investment risk internationally, along with the rise in volatility and the Greek state’s inability to tap the markets have banished any thoughts of testing the waters with a new issue.

“At the moment the climate is not favorable, especially for markets in the Euro periphery,” a senior foreign bank official told Kathimerini. He noted that Greece as well as Italy, Spain and Portugal are currently trapped by the upcoming end of the European Central Bank’s quantitative easing (QE) program, the repricing of credit spreads and fears over emerging markets and Italy.

The smooth operation of the country’s corporate bond market is intrinsically connected to the international climate and local long-term developments, said Marios Koumis, senior official at a foreign bank active in Greece.