Greece’s new sovereign five-year issue received unexpectedly high demand in initial price talk on Monday.
The bond gets officially priced mid week, and on that matter Standard Chartered published an interesting view on Tuesday:
The large yield concession built in before the deal seems to be gradually contracting, but it is crucial for Greece to receive substantial demand for this deal, which is expected to be priced by mid-week (Tuesday or Wednesday).
Greece is not yet on the path to default; scenarios of imminent Greek default are based on rather unrealistic assumptions. True, Greece will have to issue close to EUR 50bn in 2010, but it still benefits from the relatively high average maturity of its debt – around eight years – which minimises rollover risk for now.
Duration, at 4.2 years, suggests some exposure to jumps in short-term rates, but large jumps are unlikely for now given the current European Central Bank (ECB) stance.
In other words, an emphasis on short-term debt over the past year has probably resulted in a cheap source of funding for Greece as the share of debt with an average maturity of less than one year increased. Were Greece to maintain its commitment and to implement the first steps of its ambitious SGP programme, we would expect the market reaction to be positive. It is clear, however, that nervousness towards sovereign issuers – especially those with low fiscal credibility – is increasing. While we remain long Greece vs. Bunds in the medium run, we expect the path to a narrower spread to be volatile.
In other words, despite Greece’s fiscal festering, in terms of timing in the bond markets, the country has played its hourglass rotations perfectly.
It’s what you might call the Goldilocks approach to issuance — not too long, not too short. Just right.
Related links:
The European funding problem, charted – FT Alphaville
A big year for European sovereign bonds – FT Alphaville
Austrian CDStrudel – FT Alphaville
沒有留言:
張貼留言