With the uncertainty about the course of interest rates on both sides of the Atlantic to hold well, affecting also the yields of Greek bonds, the Public Debt Management Organization takes the plunge and hits the markets with a long-lasting version of the order of 30 years.
The closing of the offer book will show the extent of the demand that will be manifested and also the final cost at which Greece will borrow. Beyond that, however, what matters is that the manager of the Greek debt can “sell” such an issue to markets accompanying it with a convincing “story” regarding the reliability of the “products” it has.
So why do markets consider Greek bonds to be “eaten” even at this maturity? (s.p. our 30 years reach 2054 much further than any time milestone like 2032 etc).
1. Firstly because Greece’s publishing activity is one of the smallest in Europe. Annual financing needs are limited to 5% of GDP (around €10 billion) when the Eurozone average is at 10%. So, anyone who wants to buy Greece (especially since we belong to the investment grade, the managers must buy Greece) does not have many opportunities. High demand, low supply, the basic law of economics.
2. Secondly Greece is selling a “guarantee”: locked-in debt service interest in cash terms at €5 billion for at least 20 years. And because the debt belongs to the official sector and because swaps have been entered into that neutralize any charges from rising bond yields
3. Thirdly Greece is starting to be “measured” by houses and investors not only on the basis of the ratio of debt to GDP (there we are improving but we have the worst performance in Europe) but also on the basis of the ratio of “net” debt to GDP. There now comes the factor of the country’s high cash reserves, which can exceed 36-37 billion euros as of today. There is no other country with such a ratio of cash reserves to GDP.
Acceptance of today’s issue by the markets will send the message to the markets that Greece already covers the annual borrowing program from the first four months. Reaching 8 billion euros or more (so far it has collected 5.2 billion euros) it will essentially have collected the required resources especially if you take into account that there are 6 reissues ahead that can guarantee to bring in 200-400 million euros each.
