Greek return to financial markets attracts flock of investors

http://www.theguardian.com/business/2014/apr/09/greek-return-financial-markets-attracts-investors

Version 0 of 1.

Greece will make a successful return to the financial markets on Thursday after investors flocked to its first sale of government bonds since the eurozone crisis flared up four years ago.

There was strong demand for a new five-year bond, despite the country being gripped by its first anti-austerity general strike of 2014. By early evening Athens had received more than €11bn (£9bn) of bids, pushing down the interest rate it will pay on the debt at Thursday's sale towards just 5%.

The general strike disrupted transport services, schools and hospitals in Greece, with thousands of people marching past the parliament building. The private sector GSEE union urged Antonis Samaras's government to change its austerity programme, and ditch the "dead-end policies that have squeezed workers and made Greek people miserable".

Greece could raise as much as €2.5bn from the bond sale, those close to the deal say, a sign of confidence two years after Greece came close to crashing out of the euro. The country received bailouts totalling more than €200bn from the IMF and EU.

The strong demand sparked a rally in eurozone sovereign debt in the bond markets, driving up the price at which Greece's 10-year bonds were changing hands – and therefore driving down the yield.

Some fund managers warned, though, that Greece still faces serious challenges in the years ahead. Paul McNamara, investment director at fund manager GAM, cautioned that Greece will only be able to repay the bonds in 2019 if it sticks with the economic reform plans agreed with international lenders.

"For Greece to be paying in full and on time in five years is dependent on them staying on good terms with the Troika and sticking with the (IMF) programme. A yield of around 5% feels low for what, for us, seems like a speculative investment," said McNamara.

Jon Jonsson, a senior portfolio manager at Neuberger Berman, told the Wall Street Journal that he was "unlikely" to take part in the sale, as the low yields did not reflect the risk of buying Greek debt.

Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan and Morgan Stanley have all been hired to handle the debt auction.

Danske Bank's dealer Owen Callan has predicted that a successful sale will help other eurozone countries, telling Reuters:

"Yields in Portugal, Italy, Spain and Ireland are no longer just compared to what is below them, but also now to what is above them. As Greek yields fall, that should help provide further momentum in these markets."

On Friday, German chancellor Angela Merkel will visit Athens in a show of solidarity with the country which has suffered the most since the eurozone debt crisis began.

Odysseus Trivalas, president of the public sector union Adedy, said civil servants will hold a protest rally to mark Merkel's visit.

"What everyone has to know is that unions in Greece are going to intensify protest action in the run-up to the European elections," Trivalas added.