That’s ‘D’ as in debt, naturally.
On Friday the Hellenic Republic announced an upcoming sale of €3bn to €5bn worth of 5-year bonds, reportedly mandating Credit Suisse, Deutsche Bank, Eurobank EFG, Goldman Sachs, Morgan Stanley and the National Bank of Greece for the syndicated sale.
And inevitably, the sale is being seen as a key test of investor demand for Greek debt, with significant repercussions for the Greek state if it should fail.
Here are some thoughts from Gary Jenkins at Evolution Securities:
The Greek Debt Management Agency on Friday said it would issue a minimum of €3bn of 5- or 10-year bonds via a syndicated offering in the near future. Bond spreads widened to new highs following the statement on concern it will not be able to get the supply away, but tightened slightly in the afternoon as a 5 year issue was announced and the market speculated that an issue would not have been announced had there not been a significant order book backing it. Now the intention to raise money is in the public domain it is vital for Greece that the issue is successful. If it is then it is likely that there will be a slight relief rally just on the basis that they can tap the markets. If for any reason the deal does not come or is not viewed as a success the it will alert the markets and the rating agencies to the fact that Greece’s ability to fund itself has been curtailed, which could easily lead to a vicious circle of further debt downgrades and rising yields. Let’s hope for their sake that the market calms down somewhat because they are going to need all the help they can get considering comments made by ECB member Gonzalez-Paramo. He said that he considered as absurd the idea that the EU would provide Greece with a loan. The 10 year spread over German bunds closed at 309bps, 18bps wider on the day.
Local paper Imerisia reported today that Greece will start taking orders from today, Monday, which means we might get some colour on demand very soon.
In the meantime though, we note that yields on the five-year Greek bond were initially down this morning, but look to be on the rise as of pixel-time. Bloomberg is now reporting that the bond sale sale of bonds may be priced to yield about 375bps above the benchmark mid-swap rate.
Update: Courtesy of Marc Ostwald at Monument Securities, the book is now closed at €9bn, with the issue capped at €5bn — a decent turn-out, causing the euro to move higher against the dollar.
Note the revised spread though:
*Greece 5yr €uro Benchmark – Books > €11bn/Spread revised
Issuer: The Hellenic Republic A2 neg/ BBB+ neg/ BBB+ neg RegS / 144A
Amount: €uro Benchmark Cpn: tbc % ann, act/act
Settlement: t+5 (tbc) Maturity: 20 August 2015 (5 years)
PriceGuide: MidSwaps + 350/365bps ****
Leads: CS, DB, Eurobank EFG, GS, MS & NBG + coleads B&D: DB (duration manager) Timing: Books open, pricing no later than mid week
Related links:
Sprεαding… – FT Alphaville
Grεεk dεbt disastεr – FT Alphaville
The sovereign debt premium – FT Alphaville