Difficult market conditions hit demand as Greece completes bond sale

Difficult market conditions hit demand as Greece completes bond sale

 

By Lefteris Yallouros – Athens

Greece’s second bond sale in four months missed a set target of EUR 3 billion by half, as demand for riskier eurozone debt was hit Thursday due to growing financial concerns about the health of the parent company of Portugal’s largest bank, Espírito Santo.

A Greek Finance Ministry statement said that offers for the bond reached €3 billion ($4 billion), of which €1.5 billion were accepted. The bond will yield 3.5%.

“Despite the exceptionally negative climate that was created yesterday and today in international markets, and particularly in the markets of the periphery, Greece raised €1.5 billion from the total,” the statement reads.

Spain’s Banco Popular, decided to postpone bond issues on Thursday fearing the reaction of investors.

Greek Finance ministry officials appear pleased that the bond sale went ahead, considering it a success that will allow the government to open another book for the three-year bonds in the near future.

Speaking at a conference organized by The Economist in Athens on Thursday, Prime Minister Antonis Samaras said on of the government’s next objectives now is to ensure the long – term viability of the Greek sovereign debt. “We are very close (…) we have achieved this by hitting targets and will make sure of it by the end of the year without new bailouts, memoranda, or fresh austerity” Samaras said.

Meanwhile, Thursday marked the first meeting in Athens between troika auditors and Finance minister Gikas Hardouvelis. According to reports in the Greek press, the inspectors flatly denied Hardouvelis any room to maneuver in terms of lowering taxes. The troika reportedly expressed concern about recent calls by ministers for tax cuts and urged the Greek government to deliver agreed reforms.

Despite initial indication that this assessment by the troika will be quick (7-10 days) leaving more critical issues to be revisited in the Autumn, the first warnings were delivered on the very first day that Greece’s lenders are not prepared to allow an overhaul of the country’s adjustment program. Given the difficulties in Thursday’s bond sale, Greece was reminded of the difficult road that still lies ahead in its economic recovery effort.