March 5, 2019 / 3:10 PM / 6 months ago

Greece gets investor thumbs-up with first 10-year bond sale since crisis

ATHENS/LONDON (Reuters) - Greece drew strong demand on Tuesday for its first 10-year bond issue since plunging into a debt crisis nine years ago, in a clear vote of confidence from markets in its economic revival days after securing a two-notch ratings upgrade.

FILE PHOTO: A Greek national flag flies at half mast over the parliament building as a period of national mourning is declared for the victims of wildfires, in Athens, Greece, July 24, 2018. REUTERS/Costas Baltas

It raised 2.5 billion euros (2.15 billion pounds) from a sale that drew offers worth 11.8 billion euros, it said in a regulatory filing.

The yield was set at 3.90 percent, a slim premium judged by the secondary yields of outstanding Greek bonds and down from initial guidance of 4.125 percent. The coupon was 3.875 percent.

Greece emerged from its third international bailout six months ago, after nearly a decade of economic austerity and reforms implemented under tight supervision by its foreign creditors.

Greece 10-year bond yield -

“This issue is a testimony to how far they have come,” said Rabbani Wahhab, senior fixed income fund manager at London and Capital, urging Greece to stay the path of reforms and fiscal prudence.

The country aims to raise up to 7 billion euros in total from debt markets this year.

It had already pocketed 2.5 billion euros from a five-year bond in January, and was encouraged to tap the market again over a longer maturity after Moody’s upgraded its rating on Greece by two notches last week, sending yields on existing debt to a 12-year low.


Because the new five-year bond sold in January and Greek debt has performed well along the whole curve, the 10-year bond deal could be priced at a fairly low yield whilst still providing a reasonable new issue concession, said Christina Cho, a syndicate banker who manages public sector debt sales for BNP Paribas in London.

“There are more high-quality accounts demanding the new Greek bond outside of Greece and that does demonstrate a return to form,” she told Reuters.

“What we see is more demand from buy-and-hold investors.”

The yield on the Greek benchmark maturing in January 2028 stood at 3.69 percent on Tuesday afternoon.

Greece can stay afloat without recourse to markets up to 2021 thanks to a 27-billion euro cash buffer it has built with unused loans and money raised from markets.

But it still needs to show it can refinance itself from bond markets alone, without external support.

Prime Minister Alexis Tsipras, whose term ends in October, called the bond issue a great success.

“Demand is impressive already,” he told lawmakers before books closed. “It’s a decisive sign that we are turning a page, emerging from the crisis period, that things can improve.”

As part of its post-bailout economic transition, Athens has agreed to achieve a 3.5-percent-of-GDP primary budget surplus - which excludes debt servicing costs - up to 2021.

But investors will be closely watching for any signs of backtracking on its reform commitments or fiscal slippage in the run-up to the election.

Greece mandated BNP Paribas, Citi, Credit Suisse, Goldman Sachs, HSBC and JP Morgan as joint lead managers for the 10-year issue.

Greece's credit rating -

Additional reporting by Angeliki Koutantou and Dhara Ranasinghe in London; Writing by Renee Maltezou and George Georgiopoulos; editing by John Stonestreet

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