Greece sells debt to private investors for first time in three years

  • 26/07/2017
Greece debt
The return to the International Bonds Market will increase the trust of international investors. Photo credit: Getty

Greece has sold debt to private investors for the first time in three years, a significant step towards gaining financial independence and exiting its third international bailout next year.

The deal comes a month after euro zone finance ministers signed off on a new loan and sketched out measures to erode Greece's debt mountain after the current bailout finishes in August 2018.

Athens says the Wednesday (NZT) sale of a new five-year bond is a test run to ensure Greece can rely on market funding next year.

A tender of old bonds run alongside the sale will help lower its repayments in the years following its bailout exit.

The deal did not initially attract as much demand as the country's brief foray into markets in 2014 but it looked set to be successful and priced at what investors said was a very competitive level with a yield below five per cent.

"It's extremely positive that they have come below five per cent. Greece is now able to fund itself," said Louis Gargour, chief investment officer of hedge fund LNG Capital, who said he was considering buying the new bond.

Analysts said some investors would be put off by Greek government bonds having the lowest credit rating in the euro zone and not being eligible for purchase by the European Central Bank under its quantitative easing scheme.

When Greece sold three billion euros of five-year bonds with a coupon of 4.75 per cent in 2014, demand reached more than 20 billion euros from 600 investors.

It followed that with another sale a couple of months later but then quickly lost market access again as a newly elected leftist government argued with creditors over debt relief.

That experience, and the lingering concerns around Greece's debt mountain, which stands at 180 per cent of economic output, might have dented demand this time, analysts say.