Translated material
Settled in comfortably
Stock markets rose in anticipation of a successful Greek bond placement
After the European Union approved a financial aid plan for Greece, it entered the public debt market, yesterday placing seven-year government bonds worth 5 billion euros ($6.7 billion). According to experts, the placement should have been successful, since the solvency of Greece was confirmed by the decision of the EU authorities. Analysts, however, are not yet sure whether the country will be able to extricate itself from the crisis.The organizers of the placement were the Greek Alpha Bank and Emporiki Bank, as well as the international financial groups Credit Agricole, ING and Merrill Lynch. The bond yield will be 6.3%, about three percentage points higher than eurozone benchmark German bonds. According to sources in The Financial Times newspaper, demand for securities within half an hour after the opening of the order book exceeded 2 billion euros. The spread between 10-year Greek and German bond rates, indicating investor confidence in Athens debt, was above 3% (it was 3.3% a week earlier). This suggests that investors have become more confident in Greece. Analysts had predicted strong demand for bonds as their interest rates remained high and the risk of default had dropped markedly following the announcement of European support for Greece.
In early March, Greece placed ten-year government bonds. Demand from investors reached 16 billion euros, although the authorities expected to sell securities worth 5 billion euros. In January, Greece issued bonds worth 8 billion euros, while the order book was also oversubscribed, despite the debt crisis.
The total debt of Greece is approximately 300 billion euros, that is, 110% of GDP. Between April and May, the government needs to refinance over 22.5 billion euros of public debt. According to the Greek government debt management agency, in April the country will have to repay government bonds worth 11 billion euros, in May - by 11.7 billion. Athens needs to receive about 10 billion euros more. “This placement will be the first in a series of measures to raise funds to pay debts in April and May,” Credit Agricole CIB strategist Peter Chatwell told Bloomberg. “Yesterday’s placement is much more credible than previous ones, which were carried out at a significant discount,” said director of asset management at Barings Investment Services Ltd. Toby Nangle.
“Greece needs to raise significant funds over the next two months. The degree of interest in Greek bonds will show how much the decision on the country's support mechanism helped calm the markets,” said analysts at the investment company Scotia Capital. “The announcement of the support mechanism for Greece should reduce the risk of default for this country. However, its long-term prospects remain uncertain,” Morgan Stanley strategist Lawrence Matkin said in a report.
In anticipation of a successful placement of Greek bonds, global stock markets rose yesterday. By mid-trading, the pan-European FTSEurofirst 300 index rose by 0.4%, the British FTSE 100 by 0.4%, the German DAX by 0.72%, and the French CAC 40 by 0.62%. The growth leaders were securities of the financial sector. Shares of European Banco Santander, Deutsche Bank and Societe Generale added 0.6-1.3%.
American markets also opened higher yesterday. The Dow Jones index increased by 0.3% in early trading, the Standard & Poor's 500 by 0.45%, and the NASDAQ by 0.47%. The Russian RTS index closed yesterday with an increase of 2.09%, the MICEX index - by 1.74%. Quotes of Gazprom shares added 0.32%, Norilsk Nickel - 0.39%, Rosneft - 0.29%.