Greece’s spartan samurai bonds

http://ftalphaville.ft.com/blog/2009/12/09/87901/greeces-spartan-samurai-bonds/

Posted by Izabella Kaminska on Dec 09 13:25.

With all eyes on Greece’s credit quality, it’s useful to take a closer look at the type of debt the sovereign has been issuing.
For instance, Greece — like a number of other fiscally strapped European sovereigns – has of late been issuing a fair amount of foreign currency-denominated bonds, particularly yen denominations. The measure is no doubted intended to guarantee as much demand for Greek bonds as possible.
Indeed, as Financial News reported back in March, 2009:
The Greek government is eyeing the private placement of dollar- and yen-denominated bonds, a senior finance ministry official said Monday, following a successful multibillion euro placement last week, says Dow Jones Newswires.“The 2009 borrowing plan envisions raising funds through private placements and that includes the likely placement of dollar and yen-denominated bonds,” the official said. Analysts said the potential move would give the issuer much-needed flexibility in tapping the market in a generally volatile environment, without committing itself to a pre-announced schedule.“Now is definitely the time to tap all sources of financing, especially for the weaker credits in the euro zone, so the decision of the Greek Public Debt Management Agency is positive and warranted,” said David Schnautz, strategist at Commerzbank AG in Frankfurt.Dow Jones Newswires stresses that the move recalls a practice used occasionally by Portugal. Portugal΄s Treasury and Government Debt Agency last year conducted several government bond auctions which were limited to primary dealers and hadn΄t been announced to the auction publicly in advance.
Consequently, as Citi analyst Akane Enatsu noted on Monday, there has been a lot of Japanese interest in Greek fiscal developments:
Credit implication 1) — Developments in Greece have recently been a focus of attention in the sovereign credit default swap (CDS) market. Recent developments have also attracted attention in Japan because the Republic of Greece and Hellenic Railways (guaranteed by Republic of Greece) have issued samurai bonds. However, there was no particular reaction by credit spreads for sovereign CDS and samurai bonds to the latest citations by the European Council.
The following screen shots from Bloomberg, meanwhile, provide an indication of how much Greek yen-denominated paper currently remains outstanding:


To apply some values to those numbers, according to the Hellenic Republic’s latest public debt bulletin, as of September 30 2009, the government had €298bn worth of outstanding debt. The report noted 0.4 per cent of that debt was denominated in non-euro zone currencies, which equates to just over €1.2bn worth of bonds.
And while there may have been no reaction in the Greek samurai market on Monday, following Tuesday’s Fitch downgrade of the sovereign the July 2015 yen-denominated issue reacted as follows:
It’s worth noting, however, that most of these yen-denominated Greek bonds are highly illiquid having been privately placed directly with investors and banks.
Carlo Ciabuschi, who oversees government bond investments at Eurizon Capital in Luxembourg, told FT Alphaville most of these bonds would be held in the same hands until maturity, with many not trading in the secondary market at all.