February 8, 2018 / 1:14 PM / a month ago

REFILE-Greece braves jittery markets with bond sale, sees 7 bln euros in bids

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By Abhinav Ramnarayan and Lefteris Papadimas

LONDON/ATHENS, Feb 8 (Reuters) - Greece launched its much-anticipated new bond on Thursday, drawing strong investor demand for the seven-year deal despite the volatility on world markets.

The country began marketing the deal, its first issue since a debt exchange last November, at a yield of 3.75 percent. It had already received 7 billion euros of orders by 1200 GMT, a Greek government official said.

“It’s a very good result. It proves that our decision to wait a couple of days was right,” the official told Reuters.

On Monday, Greek authorities had said in a regulatory filing they were planning the sale of a seven-year bond; such announcements are usually followed by a launch the next day. But Tuesday’s severe stock market crash forced the debt agency to wait.

“The most important thing is that we have more long-term investors compared to the two previous (deals),” the official added, referring to the deals conducted in July and November last year.

The bond is seen as a litmus test for Greece, which is due to exit its 86-billion euro bailout in August but has been uncertain about attracting private sector interest.

A measure of the success of this deal would be the participation of longer-term big-money investors, rather than risk-tolerant hedge funds.

Having already made its bond market return in July last year and conducted the exchange in November, Athens is hoping to build out its debt profile with longer-dated bond issuance.

Greek government bonds are rated “B” or below by the main ratings agencies, deep in junk territory.

But the 3.75 percent yield Greece has offered at the initial marketing stages appeared sufficient to lure investors.

“I literally just put in some orders. It definitely looks attractive,” said a hedge fund manager who spoke on condition of anonymity as he is not authorised to talk to the media.

“In the longer term, progress has been made but I doubt anyone is putting in orders thinking the longer-term picture is fixed – this is a mixture of sovereign guys trying to find some yields and high-yield guys like us trying to make a quick buck.”

News from Germany on Wednesday that pro-Europe, pro-spending Social Democrats (SPD) are set to take charge of the Finance Ministry in a new German coalition government also helped boost demand for southern European government debt, including Greece.

Speaking to Reuters earlier this year, Alberto Gallo, a portfolio manager at Algebris, a hedge fund that is a long-term investor in Greece, said: “A coalition with the SPD means more willingness to find a long term solution as the SPD is pro-European and for European policy.”

The deal is set to price later on Thursday, and is being managed by Barclays, BNP Paribas, Citigroup, JP Morgan and Nomura. (Reporting by Abhinav Ramnarayan and Lefteris Papadimas; Editing by Alison Williams)

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