Athens plans for a 15-yr bond issue next week

The Public Debt Management Agency is ready for Greece’s first market foray of 2020, with the issue of a 15-year bond, which is seen raising 2-2.5 billion euros.

The PDMA has completed its contacts with investment firms and bookrunners, weighed market conditions and reached a decision along with the Finance Ministry. The first and most likely target is for this foray to take place early next week, if conditions allow for it.

Therefore bank sources say that on Monday the PDMA will likely ask the bookrunners to proceed with the issue procedures, with the book opening on Tuesday, January 28.

There is also the alternative target date of February 4, given that the verdict of Fitch Ratings, expected late on Friday, remains unknown for now.

Another unknown factor could be the local election in the administrative region of Emilia-Romagna in Italy, whose result could destabilize the ruling coalition in Rome and lead to a snap poll.

With the PDMA announcing in December that its target for 2020 is to draw 4 to 8 billion euros from the markets – and analysts pointing to the upper end of that range – the first issue of the year will be at the same level of those of 2019 – i.e. around 2-2.5 billion euros.

As for the new 15-year paper’s interest rate, this will be around 2.1 percentage points. On Tuesday, the existing 15-year bond (which matures in 13 years) had a yield of 1.8 percent, close to historic lows; therefore a yield near 2 percent is considered feasible, and would be an all-time low for Greek state debt with such a long maturity.

Although a 10-year issue would be a safer choice due to its maturity period, the PDMA has long been examining the option of a 15-year note, because this would be a landmark period: The sustainability of Greece’s debt in 2035 has yet to be determined, as the June 2018 decision by the Eurogroup to ease the Greek debt ruled that that is when the debt sustainability will be reviewed.

Consequently a successful issue will send a strong message to investors about the prospects of both the country and the national debt.