Thursday 14 December 2017

US-based investors unlikely to let Greece sell them short

Employees watch an electronic board displaying stock prices at the Athens Stock Exchange in Greece
Employees watch an electronic board displaying stock prices at the Athens Stock Exchange in Greece yesterday

Greece may discover it's no cheaper to sell bonds in the US than in Europe as its government seeks to persuade investors it can plug the region's biggest budget deficit.

Investors may demand a yield of as much as 7.25pc to buy Greek 10-year dollar bonds, 414 basis points more than benchmark German bunds and 329 basis points more than Treasuries, according to Paris-based Axa Investment Managers, which oversees about $669bn (€500bn).

TCW Group Inc, which manages $115bn in assets from Los Angeles, said Greece may have to offer a premium of as much as 400 basis points over Treasuries.


Petros Christodoulou, director general of Greece's Public Debt Management Agency, said that the country planned a "roadshow" in the US and maybe Asia to drum up investor demand for a sale of dollar-denominated bonds.

The country may offer as much as $10bn of the securities, 'The Wall Street Journal' reported the same day. Greece is struggling to tackle a budget deficit that is equivalent to 12.7pc of GDP, more than four times the European Union's 3pc limit.

"US investors won't want to be paid less than what European investors are demanding," said Stuart Thomson, who helps oversee more than $100bn as chief market economist at Ignis Asset Management in Glasgow, Scotland. "The market wants them to say we would do what's necessary to get funding costs down and if that means a more aggressive reduction in expenditure, then so be it."

Greek bonds tumbled in the past two days, driving the yield premium to hold 10-year securities instead of bunds to the most since 1998, after 'Market News International' said the country wanted to bypass IMF involvement in any EU-sponsored rescue because terms for aid would be too stringent.

The EU announced the plan on March 26. The Greek 10-year yield increased 13 basis points to 7.16pc as of 3pm in London yesterday, with the spread premium to bunds at 404 basis points.

"Spreads reflect the worry in the market about whether the agreement that seemed to have been reached is now really viable," said Axel Botte, a fixed-income strategist at Axa in Paris. "There were rumours that Greece was seeking to renegotiate the deal, especially the terms of the IMF intervention."

But Greece hasn't sought to alter the details of any EU rescue package, Finance Minister George Papaconstantinou insisted.

"There has never been any move on the part of our country to change the conditions of the recent agreement of the European Council on the support mechanism," he said in a statement. (Bloomberg)

Irish Independent

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