What does the interest rate of the last Greek bond show?

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Of Tasos Dasopoulos

Better than many other countries with investment grade, which tried their luck in the markets from the beginning of the year, Greece did well with yesterday’s issue of the 10-year bond with an interest rate of 1.84% of the issue confirming that we have entered a cycle rising yields.

Italy, Portugal, Slovenia, Austria and Belgium, which sought funds from the markets in the first days of 2022, paid a “price”. For Greece, the price was an interest rate increased by 1%, at the interest rate compared to that of the previous issue for the 10-year bond it auctioned yesterday.

Yesterday’s issue had an interest rate of 1.84%, compared to 0.81% of the 10-year issue in June 2021. However, it is not much higher than the 1.57% of the June 2020 issue, and it is certainly much better than 3.9% of the 10-year bond issue in March 2019.

The horizontal increase in government bond yields across the Eurozone is a consequence of the “clouds” that are gathering and threatening to bring the “perfect storm” in the markets. Already, the rise in inflation is discounted by the markets until the end of the loose monetary policy, by the Central Banks and the gradual increase of interest rates.

In fact, the Fed can make its move immediately, while the ECB, although it assures that interest rate hikes are still far away, is being pressured by the continuous rise in inflation. It will soon be under more pressure from both Fed rate hikes and markets.

Especially for the Eurozone, the uncertainty is further increased by the electoral contests in the also heavily indebted Italy and Portugal in the next few days. In April, the elections of the EU Presidency of France are coming.

With these data, the climate will remain tense in the coming months and government bonds on both sides of the Atlantic will experience a steady rise in their yields. Greece will not be excluded from the increases, but it keeps pace with the rest of the EU countries as if it already had the investment grade. As is well known, this does not happen anymore, with the change of circumstances no one is sure when it will happen.

The good elements of the version

At the interest rate, the 10-year issue may have followed the trend of the other Eurobonds. However, it maintained the quality data it has achieved in the issues of the last two and a half years.

Especially in yesterday’s edition, 87.2% of buyers were institutional investors. The percentage of speculative funds (Hedge Funds) remained low, at 12.8% of the total issue. Almost half (48.3%) of the 3 billion euros raised by the government went to fund managers. About 900m euros (29.8%) went to banks and 7.3% to insurance companies and pension funds.

Regarding the origin of investors, 15.5% of investors were from Greece and 84.5% from abroad. 17.1% were from the United Kingdom and Ireland, 13.3% from France, 9.1% from Italy, 7.8% from the USA, 7.2% from Germany, Austria and Switzerland , 8% from the Nordic countries, 7.2% from Spain and Portugal and 4.4% from the rest of Europe.

The issue garnered a total of 179 bids of 30 billion while the annual coupon at 1.75%.

Source From: Capital

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