Finance Ministry to keep bond issue cards close to its chest

The bond issue program for 2019 by the Public Debt Management Agency, which is to be announced on Monday, will be quite vague and features three alternative scenarios, as the prevailing view is for the state to maintain the advantage of initiative. This is because Greek bond yields remain high, and any new market foray would be a fairly risky affair.

Bond market sources argue that, in contrast to developed markets, which announce their issue timetables in detail, countries such as Greece typically avoid stating any details in order to be able to seize any opportunity that arises.

Finance Ministry sources say the target is for the state to draw some 7 billion euros, against total loan needs of almost 12 billion euros for 2019. The objective is to conduct the first issue in the first quarter of next year, possibly a five-year bond, for a relatively small amount, possibly 2 billion euros.

A Reuters report on Friday quoted a Greek official as saying there will be at least two issues in 2019, probably a medium-term and a short-term issue. The official refused to reveal the amounts the ministry intends to raise, while another source told Reuters that market conditions will determine the duration of the bonds to be issued. The agency noted that Greece has sufficient liquidity to cover its loan needs for 2019 but intends to demonstrate that it enjoys the confidence of international bond investors.

The thought of issuing a benchmark 10-year bond, the crowning achievement that Greece aspires to, has been abandoned for now. Readers will recall that the ministry had been hoping to do so at the start of this year, ahead of the bailout exit, to indicate that the country had returned to normal.

Ministry sources claim that the rise in Greek bond yields is only due to external conditions – mainly related to Italy – and express concern about the international trade war, currency instability and Britain’s possible exit from the European Union without a deal with Brussels. They do note, however, that the spread between Greek and Portuguese yields has remained stable for a long time, which is seen as a positive sign.

Market sources add that a good time for a bond issue would be when the ministry announces its plans for a special-purpose vehicle for the reduction of banks’ bad loans.