Greece returns to global markets

Greece yesterday returned to global capital markets for the first time since the euro zone crisis erupted in 2010, attracting huge demand for its government bonds in a sign of growing investor confidence in Europe's weakest economies.

Investors rushed to place €11 billion of orders for the five-year bonds, just four years after its debts triggered an international crisis that threatened to destroy the single currency and break up the euro zone.

Following a painful period of austerity and the biggest debt restructuring in history, Greece achieved a primary surplus in 2013. But with high levels of unemployment it remains the weakest link in the 15-year old currency union.

Fragility
As if to underline the fragility of Greece's recovery, the country's labour unions embarked on nationwide anti-austerity strike yesterday, forcing schools to close and bringing parts of the public transport network to a standstill. News of the debt sale was barely reported in Athens due to television blackouts.

The €11 billion order book, which is about four times higher than the amount Greece is expected to raise, includes about €1.3 billion from the banks arranging the deal. It was sufficiently robust to lead bankers to predict a yield of 5 per cent to 5.25 per cent – lower than forecast by some analysts.

Antonis Samaras, Greece's prime minister, is keen to show that Greece is able to borrow money independently of the troika of international lenders – the European Central Bank, the European Commission and the International Monetary Fund, ahead of May's European elections.

The bond will be governed by UK law in an attempt to attract investors who fear they could be wiped out by another debt restructuring.

“Tomorrow will be the moment for rejoicing, especially if the coupon is below 5 per cent,” one Athens banker said yesterday.

He said that Greek banks, which buy three- and six-month treasury bills at monthly auctions held by the debt management agency, were excluded from bidding for the five-year issue:

“It’s seen as important to tap foreign investors in order to send the message that Greece is back.”

Greece is taking advantage of falling borrowing costs across Europe, including the Republic. amid growing speculation that the European Central Bank will embark on a round of quantitative easing.

Greece’s benchmark borrowing costs on the 10-year bond hit more than 30 per cent after the country’s dramatic debt restructure in 2012, but have now fallen to just over 6 per cent.

– Copyright The Financial Times Limited 2014