Greece’s return to international bond markets in January with a 2.5 billion-euro issuance is credit positive for its credit-worth, Moody’s credit rating agency said. The firm rates Greece at B3 Grade with positive outlook.
“It was the first debt issue of Greece outside a program after almost a decade of being dependent on EU and IMF funding”, wrote the analyst of the agency Michael Michailopoulos in a note to customers, adding: “The exit of Greece in the international capital markets is positive for the lender as it reflects the improved investor confidence and paves the way for Greece to return fully to financing by the markets”.
According to his estimate, with the support of a substantial capital cushion of about EUR 26.5 billion (13.8% of GDP) and strong support from Eurozone creditors as evidenced by the medium-term debt relief measures agreed in June 2018, Greece will continue to be funded exclusively by the capital markets. This year, the Public Debt Management Agency (PDMA) is planning to issue bonds worth up to EUR 7 billion – to which the recent issue contributed almost 36%.
While the cost of the bond is much higher than what Greece pays on the loans received from EFSF and ESM, the time of issue was good, the demand was significant and the 3.6% yield is easily manageable for Greece, Moody’s notes. The previous 5-year bond issue of July 2017 had an interest rate of 4.625%. The 3.6% interest rate of this issue reflects a more stable domestic political environment and less difficult market conditions, as the government took a confidence vote in the House on January 16 and passed the Prespes Agreement.
According to reports in the media, Moody’s notes, fund managers, who are typically longer-term investors, bought the lion’s share of the bond.
The yield on the new five-year bond issue makes the country’s borrowing cost similar to that of Cyprus when the country came out of its own program in March 2016, but is higher than Portugal during its own first steps after the memorandum./IBNA