Tags: hans | parisis | greece | bonds

Greek Debt Offering May Really Only Be a Time Bomb

By Hans Parisis   |   Thursday, 04 Mar 2010 01:59 PM

So, here we have it. Greece, and with it, “hope” is back, at least for the moment, in the market.

Demand for Greece’s new 10-year bond reached about 16 billion euros ($21.69 billion). Greece has offered investors an interest premium of 0.38 percentage point over existing debt yield.

The government has sold the new notes at a spread of 300 basis points more than the mid-swap rate, or a yield of 6.39 percent. That compares with the 6.1 percent interest on Greece’s existing benchmark issue due July 2019, according to data compiled by Bloomberg. The yield difference between 10-year Greek bonds and their German equivalent, the bund, widened 5 basis points to 289 basis points.

Greek debt agency Chief Petros Christodoulou said: “Greece is back in the market. The allocation will be predominantly (95%) to real money accounts.”

He also informed Greece would issue 5 billion euros of bonds, due June 19.

The Greek bond was mandated to Barclays Capital, HSBC, Nomura, NBG and Piraeus. It’s interesting to take notice that no U.S. bank appears.

The Greek bond issue was a crucial test ahead of a period between April 20 and late May when Athens needs to borrow or refinance 20 billion euros.

Greece has to borrow some 54 billion euros ($73.22 billion) through sovereign debt issues this year, and has so far raised around 13 billion euros ($17.63 billion). But low market confidence in Greece has translated into extremely high borrowing costs for Athens, and the government has been seeking for a way to borrow at more reasonable rates.

Nevertheless, a recent Reuters poll, before the latest measures were announced, showed economists were skeptical about Greece's ability to cut its deficit this year. Only 18 of 47 respondents said they believed Athens would achieve the promised target of a reduction by four percentage points of GDP.

Bottom line: We’ll have to wait and see if the actual timid resurgence of “hope” for a doable solution for Greece’s problems will be confirmed by what will happen in the real world and “real” confidence in Greece will return.

I usually don’t build on “hope” only. I’m afraid Greek officials are only buying time for the moment.

Meanwhile, Greece's main private and public sector labor unions have called for a three-hour work stoppage for Friday, stepping up opposition to new austerity measures designed to stem a debt crisis that has shaken the euro zone.

About 70 communist trade unionists of the Communist PAME union occupied the finance ministry Wednesday, preventing workers from entering the building, police said, in the latest protest action against pay cuts and a pension freeze ordered by the Socialist government.

The two main unions, which represent 2.5 million workers or half of Greece's workforce, say extra public sector wage cuts and tax hikes announced on Wednesday to tackle a 300 billion euro ($406.78 billion) debt mountain will only hurt the poor.

“The measures are cruel, unjust and one-sided. The burden is not equally shared,” Stathis Anestis, spokesman for the private sector GSEE union, said on Thursday. “There is a great risk of an even deeper recession and a significant rise in the unemployment rate.”

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So, here we have it. Greece, and with it, hope is back, at least for the moment, in the market. Demand for Greece s new 10-year bond reached about 16 billion euros ($21.69 billion). Greece has offered investors an interest premium of 0.38 percentage point over existing...
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2010-59-04
 

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