Stournaras Cautious On Market Return

Finance Minister Yannis Stournaras said Greece is testing the waters before returning to the bond markets soon.

ATHENS – With investors seemingly eager to jump back into buying Greek bonds for the first time since a crushing economic crisis began four years ago, Finance Minister Yannis Stournaras said it won’t happen soon.

“We will return by the summer, within the first half of the year,” he told Vima FM. “There is no rush.” That came after a flurry of reports the Finance Ministry was ready to issue a sovereign bond of more than two billion euros ($2.74 billion) imminently, as soon this week or net.

Stournaras threw cold water on the reports. “We do not need this money to cover a funding gap,” he said. “We are testing the water and trying to easy the yield curve. We have absolutely no need for the money and there is no need to rush.”

Stournaras denied that the government was considering a bond issue almost immediately to distract attention from Panayiotis Baltakos having to resign as Cabinet Secretary, a top aide to Prime Minister and New Democracy Conservative leader Antonis Samaras.

That was after Baltakos was seen in a videotape telling neo-Nazi Golden Dawn party spokesman Ilias Kasidiaris the government trumped up charges against the extremists who have been accused of running a criminal organization.

“We are not going to take the risk of returning to markets for political reasons,” Stournaras, adding it wouldn’t happen before German Chancellor Angela Merkel’s April 11 visit to Athens, a trip seen as trying to give him a boost after he rammed a reform package through a contentious Parliament as ordered by international lenders.

Sources with knowledge of the process, however, had told Kathimerini that one of these two options was likely to be adopted and that the bond issuance could happen quickly, either the day before her visit or before the Easter holiday the following week.

The government ruling parties of New Democracy and its coalition partner the PASOK Socialists are trailing in polls with elections looming next month for Greek municipalities and the European Parliament, losing even more support in the wake of the Baltakos affair.

The government had been riding high after the reform bill led the European Union, which along with the International Monetary Fund and European Central Bank makes up the Troika which has given Greece 240 billion euros ($330.7) in two bailouts, to say it would release a pending 8.3 billion euro installment.

But there were said to be worries about the impact the Baltakos affair might have on the interest rate that Greece would have to pay if investors became wary of political unrest and even the likelihood there would have to be early elections if the ruling parties continued to fade.

Hoping to stem unrest, Samaras also said that as much as 70 percent of a primary surplus that could be as high as 2.5 billion euros would be returned to low-income pensioners, the military and emergency personnel, but not others also affected by harsh austerity measures implemented in return for the international loans.

Moody’s was due to announce its latest rating for Greek debt but postponed its decision until August.

It is expected that Greece will aim to raise in excess of 2 billion euros, although there has been no final decision on the amount yet. The yield is expected to be between 5 and 5.5 percent.

“We don’t think a return to the bond market is premature and expect the issuance to go well at the right price with a reasonable concession,” analysts at Morgan Stanley wrote, in a note to clients, the Wall Street Journal reported.

Greece said it intended to sell a bond with a maturity of between three and five years. Morgan Stanley analysts said a fair yield on a five-year bond would be about 5.3%, or 4.2% for a three-year deal.

The short-dated nature of the potential issue is likely to appeal to investors given the long-term health of the country remains uncertain.

“It is very difficult to argue that Greek debt levels are sustainable, but most of this debt is owed to official sources with long maturities, with significant periods even before interest is payable. Therefore a short-dated bond issue is arguably a good investment, but we have to remember that the long-term fundamentals remain poor,” Martin Harvey, fixed income fund manager at Threadneedle Investments in London, told the WSJ.

Greece has been locked out of the markets after seeing the rescue loans and stiffing investors with 74 percent losses, including Diaspora bondholders.