Greece tests bond waters as euro rises

GREECE will dip its toe back into the European bond market today when it tries to raise €1.2bn (£1.1bn), days after politicians moved to calm investors’ nerves with details of a €30bn funding package on standby.

Analysts expect the relatively small issue to get away smoothly following the announcement by eurozone ministers and the International Monetary Fund on Sunday, which restored a degree of confidence to markets. The euro rallied to a three-week high versus the dollar yesterday and yields on shorter duration Greek bonds fell by nearly two percentage points.

Today’s bond placement is expected to be successful because it is comprised of a mixture of six month and 12-month bonds. Buyers have been reassured by the European Union’s safety net, which would extend loans to Greece for three years at five per cent interest. The IMF would provide an additional €15bn if needed.

However, investors will be watching the bond’s performance in secondary markets closely after the €5bn placed in late March traded poorly.

Elisabeth Afseth of Evolution Securities said: “The last issue is still underwater. It’s important that whatever they do now does better. Investors get fed up losing money.”

Should today’s issuance go as planned Greece will still need to raise just over €10bn more by May to meet its repayment schedule. It will probably need to tap markets twice for the cash, including a dollar-denominated bond planned for the end of April.

Ben May of Capital Economics said the eurozone’s statement would see Greece through its immediate funding needs, but said the heavily indebted nation would need to call on the package “sooner rather than later”.