Saturday 16 December 2017

Treasury agency not planning to tap Irish-American market

Athens seeking to raise $3bn from Greek community in US

Thomas Molloy and Donal O'Donovan

THE National Treasury Management Agency said yesterday that it has no plans to follow in the footsteps of the Greek government and market bonds to Irish-Americans.

Greece said that it wants to sell about $3bn (€2.2bn) of bonds to retail investors in the US. The government in Athens approved the bonds, which will be aimed mainly at people of Greek descent, up to a nominal amount of $3bn, according to a statement. No further details were available.

Finance Minister George Papaconstantinou plans to raise money from so-called diaspora bonds as debt market investors demand the highest rates in the euro area to lend money to Greece.

The announcement came a day after Moody's cut the country's sovereign-debt rating to B1 from Ba1, citing increased risk of default and the failure to reach tax revenue goals.

Greek government bonds slid, driving the yield on the 10-year security to the highest since before the euro started in 1999. The yield jumped as much as 45 basis points to 12.78 yesterday -- the highest level since the introduction of the euro in 1999.

The spike has lifted Portugal's 10-year yield to more than 7.5pc, a cripplingly high level that will almost certainly force Portugal to accept a deal. Ireland fared little better than its fellows, with yields of 9.52pc at one stage yesterday, which was higher than rates before the IMF/EU bailout was agreed.

The yield on Ireland's 10-year government bonds hit a high of 9.442pc. Irish short-term borrowing cost hit a fresh high. It now costs 8pc for Ireland to borrow over just two years in the bond market

With Greek and Irish yields at record highs, analysts again questioned the long-term value of accepting a bailout aimed at gradually allowing countries to re-access real markets.

Credit analyst Gary Jenkins of Evolution Securities said his clients believe that Greece will be forced to restructure its debt once its bailout ends in 2013 if it cannot get creditors to agree to swap old bonds for new debt.

The Greek government did manage to borrow €1.6bn yesterday. That was through a six-month bond for which it was paying 4.75pc and was mainly placed with domestic lenders.

ING Bank's Padhraic Garvey told the Irish Independent that the markets do not expect Ireland to be forced into default.

He said the debt dynamics of both Greece and Ireland have the potential to spin further out of control unless there is a return to growth. However, Ireland, with its strong export markets, is a better bet to achieve that growth, he said.

Investors attending the Euromoney Bond Investor Congress in London predicted that Greece would inflict losses of about 50pc on bondholders and extend maturities by five to 10 years as it reduces its debt load in a series of restructurings.

"The first rescheduling won't be enough and they will have to come back," said Louis Gargour, chief investment officer at hedge fund LNG Capital.

Almost all the 400 people present at the panel expect a European nation to restructure in the "next couple of years," according to a show of hands during the session.

Credit-default swaps on Greek government notes imply a 58pc probability that Greece will default within five years. (Additional reporting, Bloomberg)

Irish Independent

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