The financial markets welcomed Greece’s return to the medium-term bond market, on Tuesday 25 July.
After being absent from the medium-term markets since 2014, the Greek treasury has now issued five-year bonds. This was a test for the Greek authorities hoping to prove that Greece will be capable of returning to financial autonomy by mid-2018 when the third aid plan comes to an end. Six banks were selected to manage these assets: BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC and Merill Lynch.
In particular, the operations took the form of trading in securities with the State offering holders of 2014 securities the option to repurchase these at 102.6% of nominal value. This operation also allows the Greek State to push back the deadline to repay these securities from 2019 to 2022.
On Tuesday, the Greek government issued a five-year bond targeting an interest rate of 4.75%. In the end, €3 billion of securities, the same level as in 2014, were issued at an interest rate of 4.65%. Demand for sovereign bonds considerably outstripped availability, as the order book would have reached more than €6.5 billion. The yield in the order of 4.65% is, moreover, less than in 2014, when it stood at 4.95%.
In Athens, Pierre Moscovici talks of a watershed
This return to the markets came on the same day as the visit to Athens of Pierre Moscovici, the Commissioner for Economic and Financial Affairs, where he met several contacts, such as finance minister Euclide Tsakalotos and Prime Minister Alexis Tsipras. The latter welcomed the fact that the Greek securities had gone down so well with investors.
On Tuesday morning, Moscovici first of all welcomed this return to the medium-term debt markets “at reasonable rates”. He also welcomed progress on reforms and budgetary consolidation made by Greece, the finalisation of the second monitoring mission of the current bailout plan, which has led to the payment of a further tranche of aid, the clarifications provided by Eurogroup in mid-June as to the medium-term debt relief measures (see EUROPE 11810) and the IMF’s agreement in principle to support Greece financially once again (see EUROPE 11835).
The Commissioner also took pains to stress that the European Commission had proposed to bring the Hellenic Republic out of the excessive deficit procedure (see EUROPE 11828).
Moscovici did not, however, express any complacency, stressing that there was still some way to go before Athens could come out of financial guardianship. I would say that Greece is at a watershed, he added, one year from the end of the programme.
The Commissioner places three vital conditions on a seamless finalisation of the third Greek bailout plan. A common strategy at European level is necessary to prepare to exit the bailout plan and ensure a permanent return to growth. He also called on the Greek authorities to implement reforms voted through by the national parliament in the framework of the finalisation of the second monitoring mission (see EUROPE 11779). Lastly, he called on the creditors of Athens to respect the Greek debt relief measures decided upon at the Eurogroup last month.
It is high time to close the long chapter of austerity this country has lived through since 2010, Moscovici concluded. (Original version in French by Lucas Tripoteau)