Low interest rate rally and plans for a new exit to markets

The Greek ten-year bond is in a downward rally, the yield of which has not only exceeded the psychological barrier of 1% since last year, but also continues to “hit” successively low records in July. In the middle of summer and with the European Central Bank favoring the Greek bond market more widely, the Greek ten-year bond is around 0.60% from 0.9% at the beginning of July, with estimates showing that this climate will be maintained for the whole summer. After a successful bond issuance season, Greece is making an appointment with the markets since the autumn and information shows a possible garnering of 1-2 billion Euros, while annual planning may amount to a total of 14-15 billion Euros.

The Greek ten-year bond has taken a downward spiral after leaving the interest rate of 1% behind for months and now moves below 0.6%, where market pundits do not rule out that after the end of the summer the yields may increase, while depending on how the debate on pan-European management of the post-covid era develops, there may be fluctuations until the end of the year.

According to the economists of Capital Economics, it is estimated that the negative interest rates from the European Central Bank and the cheap money in the euro area will be maintained until 2025, with the quantitative easing continuing. Regarding the short-term period, it predicts that the ECB will maintain the current rate of bond purchases until the autumn or even December, and when it takes over, tapering will come gradually – and if conditions allow. It is anticipated that once the emergency program (PEPP) expires, the ECB will increase its purchasing power with the classic QE by the end of 2023, adding to this program some of PEPP’s flexibility. Moreover, the information from competent sources and the forecasts of economists note that the ECB will not leave Greek bonds out of QE (after the end of PEPP) even if Greece has not been given an investment grade.

Investors’ appetite for Greek securities was also evident in the latest issue in June, as bids on the reissue of the 10-year bond exceeded 29 billion euros, during which Greece raised the amount of 2.5 billion euros at a favorable interest rate. close to 0.9%, while in the January issue there was also record demand of over 29 billion euros, with a yield of 0.807%. Similarly, in the May borrowing of 3 billion Euros – with the issuance of a 5-year bond – the oversubscription reached 20 billion Euros and for the first time the interest rate approached zero levels (0.17%).

This year, the government has raised 3 billion euros through the exchange of bonds with the Greek systemic banks, 3.5 billion euros with the 10-year bond on January 27 and an interest rate of 0.807%, 2.5 billion euros through the 30-year bond on the 17th. March, with an interest rate of 1.956% and 3 billion euros in May through the 5-year bond with an interest rate of 0.17%. It is noted that in the auction on March 17, a strong investment interest was also recorded with offers exceeding 26.1 billion euros. It is noted that since July 2019 Greece has raised 27.5 billion euros – on very favorable terms – from the capital markets , of which 12 billion euros in 2020.