What will judge the new exit of Greece in the markets

By Tasos Dasopoulos

The “price” paid by Italy and Portugal, the first two countries to raise funds from the markets in 2022, has postponed for the time being the first issue of a Greek bond for the new year.

The rise in European Southern bond yields in the first days of the year, especially for Italy and Portugal, can be attributed to the election cycle in which the two countries have entered. However, Spain and France have a rise in bond yields. This means that the markets, in addition to any forthcoming elections, have already started pricing the suspension of the European Central Bank’s extraordinary bond buying program (PEPP) at the end of March, especially for countries with high debt.

With these data, it was judged that the situation was not the most suitable to become the first Greek bond issue for 2022, despite the certainty expressed in the previous days, some of the key negotiators of the Greek market.

After all, Greece, unlike other European countries, has the “luxury” to be able to choose the time and the amount of capital it will raise from the markets. The financing needs – despite the increase in debt due to the pandemic – remain very low, as 2/3 of the debt is in the hands of official lenders and even at a very low interest rate. In addition, any immediate needs can be met by the large cash reserve, which remains today over 35 billion euros.

When will we go shopping?

Nevertheless, Greece must have a presence in the markets in order to be able to complete a “visible” and competitive bond market. In this direction it should make the first issue close to the beginning of time. However, sources from the Ministry of Finance emphasize that this version should be combined with the “appropriate environment”.

It is obvious that this favorable environment includes the decline of yields to lower levels with the help of some good news about the debt. Fitch’s rating last Friday was half a step in that direction, announcing an upgrade perhaps in the summer. The American house upgraded the outlook of the economy from stable to positive without, however – as expected – upgrading the debt of the economy. He therefore maintained his credit rating at grade BB where he had upgraded us a year earlier, in January 2021.

More positive news will be the “green light” from the EU and the European Stability Mechanism (ESM) expected in the coming days for the early repayment of old expensive debts.

The final phase of the process for the repayment of the remaining 1.8 billion euros from the loans taken by the country from the IMF in the first and second memorandum and the early repayment of 10% from the bilateral loan of 52.3 billion. Greece received in the first memorandum Greece will be a positive news that can calm the nervousness of the markets and support the first exit in the markets for 2022.