Greek bonds oversubscribed

The sale of Greek bonds was eight times oversubscribed, the Greek government announced on Thursday. According to Evangelos Venizelos, the deputy Prime Minister of Greece, demand for €3 billions’ worth of five-year bonds demonstrated that the country’s debt is sustainable.

Venizelos said the sale marked a turning point in the country’s tough austerity program associated with its €240 billion bailout, which drove unemployment to a record 27.5% and erased nearly one quarter of GDP (gross domestic product).

Regarding the Greek bonds, Poul Thomsen, Deputy Director of the IMF’s European Department and currently in charge of the IMF’s programs with Greece and Portugal, said “We welcome this. It’s a fundamental objective of the program to bring Greece back to market and this is an important milestone in this regard, and that clearly speaks to the success of the program.”

Over 500 investors

Greek bonds
The Greek bonds sale success improves the country’s negotiating position.

More than 500 investors expressed interest in Greek bonds after the country returned to the capital markets for the first time since 2010. The country has been bailed out twice, not that long ago it was on the brink of exiting the Euro, and was kept afloat with €240 billions’ worth of aid from the Eurozone and the IMF (International Monetary Fund).

The bailout funds required the close monitoring of the so-called “troika” (trio, threesome) of the IMF, the ECB (European Central Bank) and the European Commission, which forced the country to implement austerity measures and tax increases that triggered social and political turmoil.

Greek bonds yield 4.95%

Initially, the bond was priced to yield between 5% and 5.25%, but as demand soared to €20 billion (chasing just €3 billion) it dropped to 4.95%, a much lower return than analysts had predicted.

The very high demand for Greek bonds was a surprise, given the country’s junk credit rating by the three main credit rating agencies – Fitch, S&P and Moody’s.

Two years ago holders of Greek bonds suffered when the country wrote off over half of the value of all its bonds held by private investors.

The coupon on the bond, which will be settled later this month, is 4.75%. Nearly 90% of the Greek bond issue went to long-term non-Greek investors, according to the Finance Ministry. A Greek government official said the country had sought to raise €2.5 billion.

Venizelos said “Greece returns to the bond markets under the same or even better terms than Ireland and Portugal.”

Michael Michaelides, a rates strategist at Royal Bank of Scotland Group Plc, London, said in an interview with Bloomberg Businessweek “I think they will come to markets again at least two times more this year. This massively helps Greece in negotiations with the troika.” Michaelides had initially forecast that Greece would raise €5 billion from markets this year; he has now raised his prediction to €8 billion.

At the beginning of April, 2014, Eurozone ministers approved the next €8.3bn ($11.4bn) bailout installment. An initial €6.3bn will be paid at the end of this month, followed by €1bn in June and another €1bn in July.

Car bomb in front of central bank

A stolen Nissan packed with 165 pounds of explosives detonated this morning in central Athens in a street between the central bank building and the head office of Piraeus Bank, Greece’s second largest bank. The explosion served as a reminder of how fragile society and politics remain after more than half a decade of severe recession.

The explosion, which caused material damages but no human injuries, was probably caused by anarchist guerrillas or leftist groups, the police believe.

The blast occurred close to the Ministry of Finance and the hotel where Angela Merkel, the German Chancellor, will stay on Friday during an official visit.

One hour before the explosion, newspapers Zougle and Efymerida ton Syndakton had been notified of the impending explosion by telephone.

Video – Greek bonds oversubscribed

 

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