ATHENS (Reuters) - Greece may try raise up to 2 billion euros in 5-year bonds in the first half this year, a senior finance ministry official told Reuters on Wednesday as international lenders signed off on a bailout review.
A sale would end Greece’s four-year absence from the bond market earlier than the government had planned. It was looking to come back in the second half of the year, but falling bond yields are encouraging it to move sooner. No final decision has been reached, the official said.
“We may go out to the markets in the first half but no such decision has been taken yet,” the official said on condition of anonymity. “It would be a small issue of about 1.5-2 billion euros ($2 billion to $2.8 billion), most likely a 5-year bond. Whenever it comes out, it will be a small issue.”
Greece’s plans for an early return to markets have been boosted by its progress in meeting the fiscal targets set by its lenders, who have confirmed that Athens exceeded its 2013 budget targets by a “substantial margin”, achieving a primary surplus, before interest payments, one year ahead of schedule.
Athens says last year’s surplus came in at 2.7 billion euros, compared with a bailout target for a balanced budget.
The European Union, European Central Bank and the International Monetary Fund said on Wednesday they expected Greece would continue hitting a budget surplus in 2014 and 2015.
Greece needs an exploratory, partial market foray this year to prepare the ground for new and bigger bond sales in the future, the official said.
“We have to do that to properly return to bond markets in 2015 and create a financial buffer for possible future financing needs, like Ireland did,” the official said.
Ireland, the first euro zone country to exit an EU/IMF bailout, returned to the bond market this year with a 10-year issue. It has already met its funding needs for the year.
Greece was shut out of the bond markets in 2010, when it was first bailed out by the EU and IMF to avoid bankruptcy.
Throughout the debt crisis, Athens has tapped financial markets by selling 3-month and 6-month treasury bills. Private investors also hold about 30 billion euros of government bonds with a maturity between 10 and 30 years, leaving a gap on medium-term issues.
“We can’t have a yield curve with nothing between six months and 10 years,” the official said.
Boosted by optimism about economic recovery - and Tuesday’s deal with the EU and IMF after six months of talks - yields on Greek 10-year government bonds dropped below 7 percent, near their lowest since the country’s 237 billion-euro bailout began in 2010.
Athens bond plans were also encouraged by an issue by Piraeus Bank (BOPr.AT), the country’s second-biggest lender, which became on Tuesday the first Greek bank to sell a bond since 2009. Bailed-out Piraeus issued a 500-million-euro, five-year bond at a yield of 5 percent with investors offering to buy six times the amount offered.
But foreign lenders warned that Greek banks’ capital needs may be higher than 6.4 billion euros projected by the Bank of Greece and urged the country’s central bank to keep watch on non-performing loans.
Selling state assets is a key condition of Greece’s rescue package and a state watchdog said on Wednesday it had unblocked a 261-million euro asset sale deal, allowing Athens to meet its 2013 privatization revenue target of 1.3 billion euros, with a delay of a few months.
But a senior official at Greece’s privatization agency (HRADF) told Reuters on condition of anonymity that this year’s target of 3.56 billion euros would be revised downwards because of similar delays dogging other projects.
“The new target hasn’t been quantified yet but it will be definitely lower,” the official said, adding that the planned privatizations of natural gas distributor DEPA and utility company Athens Water (EYDr.AT) “will not happen this year”.
Other Greek government sources said the privatization agency would strive to raise 2.8 billion euros this year. But the HRADF official said such developments merely delay but do not derail the program: “It merely reflects cash flow delays.”
($1 = 0.7189 euros)
(Refiles to change Greek to Greece in headline)
Additional reporting by Anna Yukhananov and Renee Maltezou; Editing by Larry King/Ruth Pitchford