A record spread on the bond issue

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Greece set a new record on Wednesday when it reopened its 10-year bond, with the investment community giving it another strong vote of confidence. While the portfolio of offers matched that of the original benchmark paper issue in January, the country on Wednesday reached the smallest spread between the yield on a Greek issue and that of the German Bund since 2008.

This spread, which effectively measures market confidence in Greece (the lower the spread, the higher the confidence), stood at 115 basis points on Wednesday, against 135 basis points in January.

More than 300 investors applied to buy Greek debt in the fourth foray into the Greek market this year, the eighth since the start of the pandemic. The bids exceeded 29 billion euros while the vast majority of bidders were foreign portfolios and institutional investors.

The final yield was just over 0.9%, down about 8 basis points from the initial policy rate, and the coupon stood at 0.75% with Greece raising 2.5 Billions of Euro’s.

The market now considers this 10-year bond maturing on June 18, 2031 as the gold standard, with its issue size increasing from € 3.5 billion to € 6 billion. Market sources note that Greek bonds have returned to the investment grade group, at least in terms of technical aspects of issues, such as the size of public offerings and yield and spread levels.

Notably, the Greek state also raised an additional 1.6 billion euros yesterday with the issuance of one-year Treasury bills at a historically low interest rate of -0.31%.

Finance Minister Christos Staikouras stressed on Wednesday that the question confirms that the country is gaining the confidence of the international investment community and is gradually returning to full normalcy.

These 2.5 billion euros will be added to the cash cushion of 33.7 billion euros, while in the coming weeks further inflows are expected from other sources, such as SMPs and ANFAs and disbursements from the Next Generation EU fund. This could well mean that Wednesday was the last foray into the Greek market this year, although it will all depend on how the economy evolves and the pandemic evolves.



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