It came at a cost, but it worked.
On Thursday, Greece returned to the bond market with the successful placing of a 10-year benchmark issue which — shock, horror — even managed to attract foreign investors in sizeable sums.
According to the head of the Greek Public Debt Management agency, Petros Christodoulou, as quoted by Reuters, only 10 per cent of the issue ended up in domestic hands.
The pricing of the bond was specifically structured to woo real money investors, Christodoulou told Reuters:
On foreign investors, we have gone through each and every account and made sure that the people who put their long-term faith in us are the ones who are rewarded with the spread we are paying.
We are very heavily, if not exclusively, skewed towards real money, long-term investors. I am putting more emphasis on real money than long-term because it’s difficult to define what is long-term these days. Real money is the key word.
In total, the syndication attracted more than €16bn of demand at a yield of 300 basis points over the mid-swap rate, according to FT sources.
With the book now closed, the country is said to be planning another syndicated deal or two, before returning to a regular auctions process soon.
So, it’s ‘well done Greece’, with even Jean-Claude Trichet impressed.
As David Page from Investec noted regarding the ECB President’s remarks on Thursday:
Trichet initiated this process by repeating yesterday’s ECB statement welcoming Greece’s additional measures to augment its fiscal tightening in his opening remarks.
He added that the ECB had passed on “positive judgements” to the Greek authorities. Once again Trichet dismissed any thought of Greece leaving monetary union as “absurd”. However, Trichet did add two new interesting dimensions.
First, he described the fact that “we decided” to make a programme that was already in place more credible – perhaps revealing the influence of Eurozone institutions on the latest Greek measures. Second, Trichet said it would be “inappropriate” for the IMF to provide financial support to a member of the Eurozone (although he acknowledged much appreciated technical assistance over the past week).
As Societe Generale’s Suki Mann noted, this should set the Greek Prime Minister George Papandreou up nicely for his meeting with German chancellor Angela Merkel on Friday. A meeting which, as has been stressed, was never about aid anyway:
The €5bn, 10-year Greece deal today underpinned confidence in the market (€10bn plus book) and should set us up nicely ahead of the crucial meeting in Berlin between Merkel and Papandreou on Friday. Reportedly not about aid commitments, we’re looking for upbeat rhetoric to emerge from the meeting allowing the market to continue its upward trajectory into next week.
Onwards and upwards, for Greece then. But what’s next?
Related links:
Greece comes to market – FT Alphaville
Λιτότητα – FT Alphaville
Markets pleased by Greek plans – FT