Greek bond issue marks milestone in recovery from bailout
ATHENS, Greece – Greece’s first attempt to finance itself on bond markets since 2014 raised 3 billion euros ($3.5 billion) Tuesday from investors attracted by a high rate of return, in an encouraging sign that the country will be able to smoothly exit its bailout era next year.
The left-led government said the five-year bond issue was more than twice oversubscribed, with the yield set at 4.62 percent – showing slightly improved investor confidence since the 2014 issue, where the yield was 4.95 percent.
The bond issue is a milestone in the country’s seven-year financial crisis, as Greece will only be able to end its dependence on international rescue loans if it can borrow money directly from international markets when the bailout program ends in August 2018.
Finance Minister Euclid Tsakalotos called the result satisfactory, and added that Greece would proceed with further bond issues before the end of its bailout program in little over a year.
“I think what’s important is the quality and number of investors who showed interest in this issue,” he said. A government announcement said most of the buyers were global institutional investors and not speculative traders looking for a quick profit.
Prime Minister Alexis Tsipras’ government had pinned much on Tuesday’sissue, as it seeks to cement improvements to the economy. Though the country’s stock of debt remains very high at around 175 percent of annual GDP, the budget is much improved and most forecasters predict an uptick in growth.
Greece lost market access in 2010 when its credit rating was downgraded to junk status following revelations that key data on debts had been under-reported.
The ensuing financial crisis shook global markets, brought the country to the brink of bankruptcy and exit from Europe’s euro currency, and subjected Greeks to deep income cuts and massive job losses amid a depression that burned up more than a quarter of the economy.
The country was kept afloat by three international bailouts, provided in return for deep spending cuts and wide-ranging economic reforms.
Greece had only tapped markets once previously since taking its first bailout, issuing a five-year bond in 2014. Tuesday’s bond issue is part of a “switch and tender offer,” whereby holders of the previous bond, which matures in 2019, are asked to switch their bonds for cash.
On Friday, ratings agency Standard & Poor’s raised its outlook for Greece from “stable” to “positive,” encouraged by a recent round of cost-cutting reforms and an expected return to growth this year, although it did not upgrade its credit rating on the country, leaving it at the junk status of B-.