S&P’s Holds Greek Rating Steady, 7B Euro Test Bond Sale Eyed

Athens Stock Exchange. (Photo by Eurokinissi/Giannis Panagopoulos)

As Greece is trying to find some way to return to the markets with the end of 326 billion euros ($370.4 billion) in three international bailouts, it’s getting some help from Standard  & Poor’s which kept the country’s rating at B+ with a mostly positive outlook.

That was good news for Prime Minister and Radical Left SYRIZA leader Alexis Tsipras during an election as he said he’s bringing a recovery from more than 8 ½ years of an economic crisis without mentioning, if so, it’s largely because he reneged on anti-austerity promises once he took power in 2015.

And despite the loans and a 74 percent cut in the value of Greek bonds in 2012, the debt is still soaring by the second and foreign investors scared off by an avalanche of tax hikes Tsipras imposed, including raising the interest rate to 29 percent.

Hard-core elements in SYRIZA are also trying to keep out foreign investors and businesses and have succeeded in blocking, for now, a gold mine operation in northern Greece and the $8 billion development of the former Hellenikon International Airport on Athens’ coast.

The B+ rating still stands four notches below investment grade and Greece is living off a 22-billion euro ($25 billion) cash buffer taken from a third rescue package of 86 billion euros ($97.71 billion) Tsipras sought in the summer of 2015 from the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM.)

That’s good enough to last through mid-2020 but Finance Minister Euclid Tsakalotos said the country would try another test bond sale this year, some 7 billion euros ($7.95 billion) although two earlier test sales of 3 billion euros ($3.41 billion) each went for interest rates more than three times higher than the bailouts, making a market turn costly.

“A five-year issue would be possible at this stage,” Nikolina Kosteletou, lecturer of economics at the University of Athens told the Chinese news agency Xinhua.

“However, the terms may not be the best possible ones, as even though the yield of the bond has gone down in the secondary market, its spread from other bond rates such as that of Portugal remains large,” added Kosteletou.

The yield of the Greek five-year government bond stood at 3.1 percent on Jan. 19. The interest rate of the loans Greece received from the European Stability Mechanism in the bailouts was 0.89 percent.

“The cost might be heavy and (the government) needs to be particularly careful upon returning to the market,” Kosteletou warned.