ATHENS — Greece’s return to the financial markets with a five-year bond offering on Thursday was met with overwhelming demand from investors, and government officials hailed the sale as proof that the country was recovering from a wrenching five-year economic crisis.
Greece raised 3 billion euros, or about $4.2 billion, on an offering that attracted more than €20 billion in orders, the government said. The majority of buyers were foreign pension and investment funds, which received a 4.75 percent interest rate on the bonds.
The relatively low rate signaled a degree of renewed confidence in a country that only a few years ago was on the verge of exiting the 18-nation euro zone and saw the rates on its 10-year bonds exceed 30 percent. Ireland and Portugal, which also received international bailouts in the crisis, returned to financial markets this year.
Continue reading the main story Related Coverage Bomb Explodes Outside Greek Central BankAPRIL 10, 2014 Greece Dives Back Into the Bond MarketAPRIL 9, 2014 But in many ways, the sale on Thursday was an offer that was difficult for investors to pass up.
With bond yields low in many other countries, investors will get an attractive return, with little reason to fear that Greece will not pay them back.
The finance minister, Yannis Stournaras, described the move as “a catalytic undertaking,” adding that Greece had made “the biggest fiscal adjustment ever recorded since World War II,” in a bid to mend its finances and restore its global standing.
But in a reminder of the nation’s underlying fragility, a car bomb was detonated outside the Greek central bank just hours before the bond announcement, shaking buildings for blocks around but causing no injuries.
No one immediately claimed responsibility for the bomb, which blew out windows, leaving intact only two wheels and the axle of the car.
But a government spokesman said the intention was clear. “The evident target of the attackers is to change this image, and change the agenda,” Simos Kedikoglou, the spokesman, said on a morning television news program.
“We will not allow the attackers to achieve their aim.” A day earlier, around 20,000 demonstrators gathered near the Parliament building to protest tax increases and spending cuts that Greece’s lenders have required in exchange for the bailouts.
Many decried the bond issue as irrelevant for most Greeks, who have struggled financially under the austerity measures.
For the Greek government, which owes creditors more than €240 billion from two bailouts, the bond offer was an opportunity to show that the country is taking steps toward recovery, even if that will be a long and painful road.
A deep recession has reduced the Greek economy by more than a quarter of its size from five years ago.And unemployment is at a staggeringly high 27 percent, though data released by the Hellenic Statistical Authority on Thursday suggested joblessness was easing slightly, dipping to 26.7 percent in January from 27.2 percent a month earlier.Not everyone was tantalized by the Greek offer, however.
Fadi Zaher, the head of bonds and currencies at Kleinwort Benson in London, said his group refrained from buying because of lingering concerns over Greece’s poor economic health and a mountain of debt that has risen to more than 170 percent of gross domestic product.
“There is a euphoria right now over the euro area, and that euphoria is creating confidence around Greece,” he said. “We are cautiously optimistic about the story, but looking over the longer term we are very, very cautious about it.”
In a televised statement, Prime Minister Antonis Samaras said the strong demand for the bonds was “a sign of trust in the Greek economy and its ability to overcome the crisis.”
He added that the Greek authorities had “paved the way for cheaper borrowing in the future” and that although there was “a long way to go to definitively exit the crisis,” the outlook was improving.
The prime minister thanked lawmakers in the governing coalition for having backed tough austerity measures despite their political cost, and Greek citizens for their sacrifices.
“Today, Greeks feel greater faith in themselves and in the future,” he said. But Bert Van Roosebeke, the head of financial regulation and markets at the Center for European Policy in Freiburg, Germany, said that it was “not entirely true” to say the bond offer proved a success for Greece.
“The true winners who are profiting from today’s exercise are the banks, pension funds and insurance funds,” he said. “They are getting nearly a 5 percent yield, and there is very little risk that Greece won’t pay back the money.”
Two years ago, at the height of Greece’s crisis, the government forced bondholders to take a loss of almost 75 percent on the Greek sovereign debt they had purchased.
So rattling was the experience that the International Monetary Fund and the European Stability Mechanism, a financial backstop that was set up to help prevent the euro zone crisis from spinning out of control, agreed that private bondholders would not be subjected to the same fate in the future.
Instead, they effectively agreed to move the risks of any future sovereign debt defaults to taxpayers in euro zone countries.
The president of the European Central Bank, Mario Draghi, has also helped by pledging to do “whatever it takes” to stabilize the euro crisis.
The issue of who pays the check if Greece’s finances do not improve in the five years it will take to pay off the bonds is an important one, Mr. Van Roosebeke noted. “It’s the taxpayers in other euro zone countries.”
nytimes.com
Greece raised 3 billion euros, or about $4.2 billion, on an offering that attracted more than €20 billion in orders, the government said. The majority of buyers were foreign pension and investment funds, which received a 4.75 percent interest rate on the bonds.
The relatively low rate signaled a degree of renewed confidence in a country that only a few years ago was on the verge of exiting the 18-nation euro zone and saw the rates on its 10-year bonds exceed 30 percent. Ireland and Portugal, which also received international bailouts in the crisis, returned to financial markets this year.
Continue reading the main story Related Coverage Bomb Explodes Outside Greek Central BankAPRIL 10, 2014 Greece Dives Back Into the Bond MarketAPRIL 9, 2014 But in many ways, the sale on Thursday was an offer that was difficult for investors to pass up.
With bond yields low in many other countries, investors will get an attractive return, with little reason to fear that Greece will not pay them back.
The finance minister, Yannis Stournaras, described the move as “a catalytic undertaking,” adding that Greece had made “the biggest fiscal adjustment ever recorded since World War II,” in a bid to mend its finances and restore its global standing.
But in a reminder of the nation’s underlying fragility, a car bomb was detonated outside the Greek central bank just hours before the bond announcement, shaking buildings for blocks around but causing no injuries.
No one immediately claimed responsibility for the bomb, which blew out windows, leaving intact only two wheels and the axle of the car.
But a government spokesman said the intention was clear. “The evident target of the attackers is to change this image, and change the agenda,” Simos Kedikoglou, the spokesman, said on a morning television news program.
“We will not allow the attackers to achieve their aim.” A day earlier, around 20,000 demonstrators gathered near the Parliament building to protest tax increases and spending cuts that Greece’s lenders have required in exchange for the bailouts.
Many decried the bond issue as irrelevant for most Greeks, who have struggled financially under the austerity measures.
For the Greek government, which owes creditors more than €240 billion from two bailouts, the bond offer was an opportunity to show that the country is taking steps toward recovery, even if that will be a long and painful road.
A deep recession has reduced the Greek economy by more than a quarter of its size from five years ago.And unemployment is at a staggeringly high 27 percent, though data released by the Hellenic Statistical Authority on Thursday suggested joblessness was easing slightly, dipping to 26.7 percent in January from 27.2 percent a month earlier.Not everyone was tantalized by the Greek offer, however.
Fadi Zaher, the head of bonds and currencies at Kleinwort Benson in London, said his group refrained from buying because of lingering concerns over Greece’s poor economic health and a mountain of debt that has risen to more than 170 percent of gross domestic product.
“There is a euphoria right now over the euro area, and that euphoria is creating confidence around Greece,” he said. “We are cautiously optimistic about the story, but looking over the longer term we are very, very cautious about it.”
In a televised statement, Prime Minister Antonis Samaras said the strong demand for the bonds was “a sign of trust in the Greek economy and its ability to overcome the crisis.”
He added that the Greek authorities had “paved the way for cheaper borrowing in the future” and that although there was “a long way to go to definitively exit the crisis,” the outlook was improving.
The prime minister thanked lawmakers in the governing coalition for having backed tough austerity measures despite their political cost, and Greek citizens for their sacrifices.
“Today, Greeks feel greater faith in themselves and in the future,” he said. But Bert Van Roosebeke, the head of financial regulation and markets at the Center for European Policy in Freiburg, Germany, said that it was “not entirely true” to say the bond offer proved a success for Greece.
“The true winners who are profiting from today’s exercise are the banks, pension funds and insurance funds,” he said. “They are getting nearly a 5 percent yield, and there is very little risk that Greece won’t pay back the money.”
Two years ago, at the height of Greece’s crisis, the government forced bondholders to take a loss of almost 75 percent on the Greek sovereign debt they had purchased.
So rattling was the experience that the International Monetary Fund and the European Stability Mechanism, a financial backstop that was set up to help prevent the euro zone crisis from spinning out of control, agreed that private bondholders would not be subjected to the same fate in the future.
Instead, they effectively agreed to move the risks of any future sovereign debt defaults to taxpayers in euro zone countries.
The president of the European Central Bank, Mario Draghi, has also helped by pledging to do “whatever it takes” to stabilize the euro crisis.
The issue of who pays the check if Greece’s finances do not improve in the five years it will take to pay off the bonds is an important one, Mr. Van Roosebeke noted. “It’s the taxpayers in other euro zone countries.”
nytimes.com
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