This past Tuesday it was revealed that Greece may finally be accelerating financially. Piraeus Bank distributed 500 million euros worth of three-year bonds.
This marks the first public debt deal from a Greek leader in five years; installing over 3 billion euros worth of orders from investors. This occurrence showcases that its economy is leaning towards growth again this year. The nation's economic sentiment indicator holds at its highest level since September of 2008, while Hellenic banks are boosting new capital. Regarding this debt concern, Piraeus Bank's intention is to raise 1.75 billion euros. Additionally, Infrastructure Minister Michalis Chrisochoides stated that the country is leaning towards selling debt for the first time in the last four years before this May, as Greece strives to revamp its financial sector.
Due to heavy demands, Piraeus' issue was set to yield at 5.125%; significantly less than primary recommendations of 5.25%-5.5%. Bonds heightened in the gray market, decreasing the yield down to approximately 4.75%. This appears exceptionally low for a triple-C-rated financial institution in Europe's most disarrayed economy. Bloomberg data revealed that securities were set to yield 452 basis points over the mid-swap rate. Currently unemployment levels are at 27.5%, with a government that has only finally reached a deal settlement with its lenders in the last few days.
It is comparatively difficult to locate a similar yield on three-year euro bonds, due to a long standing credit market rally and extremely low rates. For example, the German Bund reaching maturation in April of 2017 grants a mere 0.23%. Becoming gradually extinct are short-maturity bonds yielding over 5%. 81 out of 86 senior unsecured euro-dominated banks bonds ranked as maturing in 2017 on Tradeweb's system, currently trade at less than a 2.5% yield. A mere 3.7% yield is the rate of Bank of America-Merrill Lynch's euro designated high-yield bond.
These factors fare well for Greece and its desire for a sovereign bond market reentry. As the Wall Street Journal's Richard Barley claims: "It also points to the fact that investors are taking ever greater risks-and receiving diminishing returns. But with euro-zone rates on the floor and Europe the investment destination of choice, borrowers have the upper hand for now". Frankfurt's Deka Investment Gmbh corporate bond director Volker Marnet-Islinger stated: "I don't think Piraeus could have brought this deal a year ago but now the situation in the periphery has greatly improved". These factors reveal a positive new direction for Greece's financial recovery.
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