A change in tactics for Greece’s exit strategy in the markets is being made by the Public Debt Management Agency, as it is not expected to announce an overall “spending” plan for 2019. In essence, it will be asked to inform prospective investors by letter that it is at any time ready to issue bonds.
Naturally, there is still the will for such a “move” within the first quarter of 2019, should conditions are favorable, however, a clear commitment in not expected at this time, as liquidity in the markets is given and is related to what is happening within the Eurozone, such as in Italy, France or the Brexit, but also with what happened in the surrounding area, as in Turkey a few months back.
Affordable bond prices
Indicative of the wider problems that sustain Greek bond yields is the fact that the diffusion of the crisis between Rome and Brussels led to a rally in Italian titles, with a vertical drop in yields when Greek stocks reacted more moderately. However, there is no prohibitive “price” on Greek bonds. As Deputy Finance Minister George Houliarakis stressed in the House of Representatives, referring to the cost of borrowing in the years of prosperity, “the average ten-year borrowing rate was 4.36% between 2002 and 2008. The average of the ten-year bond borrowing rate in the first eleven months of 2018 was 4.18%, lower or in any case equivalent to the borrowing rate when the borrowing rate was not even a problem, it was not even news”.
There is also the “pillow”
The above suggests that as long as the turbulences are extinguished by external factors and as the growth of the Greek economy is established, which is evidenced by a number of economic indicators, the country’s exit to markets will be approaching. In fact, the government estimates that as time goes on, the more favorable the conditions will be at both microeconomic and macroeconomic level.
Besides, there is also the “pillow” of 24.1 billion euros, which is offered for a range of uses. Its existence alone can safely keep the country out of the market for at least two years. If one even takes into account the “rolling” of three-month and six-month treasury bills (short-term borrowing), then the exit could be avoided for four years.
Obviously, this is not an objective of the government, but it shows that the country is not rushing to move into uncharted waters.
Source: Giannis Agouridis/balkaneu