The 15-year-old’s success “sets the carpet” for new releases


Issue raised $ 2.5 billion with 1,911% yield and 1.875% coupon – Reducing borrowing costs paves the way for improved debt sustainability analysis and reduction of primary surpluses by 2021.

The Public Debt Management Agency (ODHIC ) can plan its next steps in markets and its debt sustainability analysis with even greater confidence and optimism after yesterday’s issue of the 15-year bond . This analysis will prove that the outlook is far better than the European institutions have hitherto supported, which should better review and recognize that dramatically reducing borrowing costs and boosting growth give room for growth. reduce targets for primary surpluses by 2021.

The new sovereign securities raised 2.5 billion euros with a yield of 1,911% and a coupon of 1,875% . The venture has been a complete success, as both the quantitative and qualitative characteristics of the issue solemnly confirm that in the eyes of investors – and in the long run – Greece has already returned to the investment stage and has ensured the sustainability of its debt since. a landmark of 2032, when the country’s financial liabilities rise significantly as the grace period for the repayment of the EFSF’s 2nd European Memorandum ends. «In this respect, the transaction shows the investment community’s confidence in the Greek state and represents yet another example of the country returning to ‘regularity’ in international capital markets, “ the HDI said in a statement yesterday.

Institutional investors’ thirst for the 15-year sovereign issue has surpassed even the most optimistic forecasts. Total bids from 378 different investors exceeded € 18.8 billion and, according to  NM , almost 1/5 of that amount (€ 3.9 billion) came from real money investors. That is to say, in theory, the issue could be covered exclusively by institutional investors and without any significant cost burden.

In addition, another 500m euros could be raised, raising the total amount raised by the State to 3 billion euros yesterday. However, it preferred to keep the issue at € 2.5 billion (after all, the initial target was € 1.5-2 billion) and to hedge funds and other non-institutional investors with a small stake. This will leave the long-term investor appetite open and fuel the next exit in the markets, which is likely to be a 10-year bond in a fairly short time.

Asset managers eventually put 68% of yesterday’s issue or about € 1.7 billion in their portfolios. Banks ended up with 14%, insurance funds 7%, central banks 5%, hedge funds another 5% and other investors 1%. 84% of the issue went into foreign investor portfolios and only 16% ended up in Greece (about € 140m was acquired by Greek banks).

Beyond the impressive volume of market offerings, low yields, investor quality and the strong symbolism of the 15-year bond (it breaks the 2032 barrier and is the first of its kind after 2009 and the crisis), the success of the new Another issue is the change in the pricing of Greek bonds, which was first based on the same standards as other European government bonds, reinforcing the return of Greek securities to “regularity”. Rather than relying on pricing on the short-term Greek bond yields (2033 and 2037), it relied on mid-swaps, that is, the average supply and demand exchange rates for international bonds on the market.

The benefits that come from yesterday’s absolutely successful exit in the markets should add to the positive impact it will have on the forthcoming issuance of bonds by banks and listed companies and the added impetus to Hercules securitization.

The timing of the release

As stated in the announcement issued last night by the EDFX on the results of the 15-year bond issue, after Fitch upgraded the Greek economy’s credit rating to “BB” with a positive outlook last Friday, Greece announced yesterday that it will issue a 15-year bond. The bidding book opened at 10.21 yesterday morning with the intention of formulating the initial guidance in the mid-swaps area + 175 basis points. Within just one hour, investor interest had reached record levels for the post-Monomatic period, with the book officially opening with guidance on mid-swaps + 170 basis points.

Bids continued to rise rapidly, surpassing 17.5 billion euros by 13.11, making the mid-swaps spread to 165 basis points lower. The quantity and quality of bids amounted to € 2.5 billion, the final transaction size at 15.01. The transaction was officially priced at 17.59 with the reoffer spread locking in at 165 basis points above the mid-swaps, representing a yield of 1.911% and a spread of 212.9 basis points over the 15-year German bond expiring in July 2034.

The ODIHR also notes that the theoretical ‘fair value’ of a new 15-year benchmark for the Greek government was calculated by the issuing banks at 155 basis points above the mid-swaps. The calculation was based on the existing credit curve of Greece, and in particular on the basis of the interplay between the Greek bond maturing in January 2033 and the maturing January 2037. This calculation shows that the transaction offers investors a “bonus”. »10 basis points, as the release closed with a spread of 165 basis points over mid-swaps.

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