Remaining a ‘normal issuer’

Greek bond issues are expected to come up to 9-11 billion euros next year – i.e. very close to this year’s levels – according to the 2021 state budget draft, and will depend on the course of the pandemic and the needs that creates for replacing disposable cash so as to support the economy.

For this year the objective has been the maintenance of the high cash reserves, without them dropping below the €30 billion mark.

This will likely be achieved and will also constitute one of the Finance Ministry’s priorities for 2021 too, as it has proved to be the perfect safety net during this new crisis: It keeps investors positive toward the Greek debt, which has brought the cost of borrowing for the Greek state to historic lows, as the benchmark 10-year bond saw its yield drop to 0.96% on Monday.

That cushion is expected to remain Greece’s biggest weapon until the country returns to investment status in credit rating terms, which is not expected before 2023 due to the delay caused by the pandemic.

Given that the European Central Bank’s PEPP bond-buying program will remain active at least until June 2021 – with estimates putting its conclusion at the end of 2021 – Athens will aim to have a large part of its bond issues acquired by Frankfurt.

In total the ECB is expected to buy some €25-27 billion in Greek bonds, and from mid-March to today it has acquired some €12 billion. After four market forays this year, Greece has raised €10 billion, with a strong chance of another issue in the next couple of months.

Therefore this year the Public Debt Management Agency is expected to cover the ECB moves in full, and this is likely to be repeated in 2021 too.

The state’s loan strategy will target Greece’s constant presence in the money markets, the draft budget states, so along with the ECB support and armed with the exceptionally low interest rate, the country will continue to act as a normal issuer. That will help the profile of Greece’s debt, which will come to €337 billion.