No Greek Recovery Seen Without Big Bond Investors Coming Back

A woman feeds pigeons in central Athens on Wednesday, April 17, 2019.(AP Photo/Petros Giannakouris)

While Prime Minister and Radical Left SYRIZA leader Alexis Tsipras is boasting he’s bringing recovery from a nine-year economic crisis, that could depend on luring back big-time investors in the next bond issuance.

Three international bailouts of 326 billion euros ($364.52 billion) ended on Aug. 20, 2018 but a 10-year bond sold in January came at interest rates three times higher, prohibiting a full return to markets, with foreign businesses still wary with elections coming and after Tsipras unleashed a wave of taxes and hikes, boosting the corporate rate to 29 percent.

The next bond will be aimed at  more big-name, mainstream asset managers rather than hedge funds who have been its main clients in recent years, said Reuters.

Tsipras, trailing big in polls to the party he unseated, the major opposition New Democracy, is trying to shed Greece of some of its burden and the government wants to pay back 3.7 billion euros (44.14 billion) it owes the Washington, D.C.-based International Monetary Fund (IMF.)

The agency took part in two first rescue packages of 240 billion euros ($268.36 billion) but dropped out of the third, with the ESM stepping in. The early payback would be about half what Greece owes the IMF.

To maintain market access, Greece will need long-horizon investors such as BlackRock and Amundi,said the news agency, but the country still has a junk bond rating status which means Greek debt is excluded from major indexes that global asset-management firms use as benchmarks.

“We have been investing in Greece for about a year now, and see value in Greek government bonds as well as covered bonds issued by Greek banks,” Iain Stealey, international CIO for JP Morgan Asset Management, which manages $369 billion worth of assets told Reuters.

“There probably are still issues for Greece in the long term, but a majority of the debt is on the public side, which gives us comfort,” he said.

Just 60 billion euros ($67.09 billion) of a total of roughly 350 billion euros ($391.36 billion) of overall Greek debt is in free float with the rest held by the Troika and IMF.

Greece does not need to sell bonds until 2021, thanks to a 27 billion-euro ($30.19 billion) rainy day fund it took from the bailouts but Tsipras is eager to show that under him – without mentioning he reneged on anti-austerity vows – a comeback is under way.

“To attract a new wave of investors, Greece needs to build up its markets – you need access for regular issuance across different maturities,” Lee Cumbes, head of public sector debt for Europe, the Middle East and Africa at Barclays, told the news agency.

Another bond sale is an opportunity to test whether Greece can get more funding from longer-horizon investors, reducing reliance on hedge funds, who are often blamed for stoking volatility by flitting in and out of markets, flipping newly bought bonds for a quick profit, the report added.