Look Who’s Back

11/04/2014 at 6:16 pm

This week saw Greece return to the bond market. The five year syndicated deal, out yesterday, was originally intended to raise €2.5bn at 5-5.25%. Such was the level of demand, however – reported at €20bn – that the eventual issue size was €3bn at a yield of 4.95%.

So much for the detail. Greece has returned to the bond market! A key milestone along the global path to recovery from the credit crunch has been reached. This is the first Greek government bond (as opposed to short-dated money market instrument) to be issued since March 2010. And the day before it was officially announced, the ten year Greek bond yield reached 5.89%, the lowest closing level since January 2010.

Greece has not figured much on the world’s radar this year but there have been a few other noteworthy firsts as well.

Two months ago, Prime Minister Samaras gave an interview in which he estimated the country would reach a primary budget surplus of €1.5bn for 2013, one year earlier than planned. European officials expressed some scepticism and cautioned that euphoria should be postponed until the figures are formally released on the 23rd of this month. The Eurostat / ECB data on the subject does suggest this would be a stretch, but it also shows that such a surplus (which ignores the cost of debt interest) would be the first to have been run by Greece since 2002.

Less uncertainly, there was another first announced at around the same time: 2013 saw the country’s first current account surplus since records began in 1948. This was partly due to falling imports – but tourist receipts were up 15% to reach a new record and exports rose too as lower wages led to greater competitiveness.

As ever it is imprudent to consider only the upside. Greek unemployment seems at last to have peaked, but remains at an eye-watering 26.7%. Serious civil unrest remains a threat; only yesterday a car bomb in Athens went off outside the central bank building (though no one was hurt). Politics is still an area of concern too, with an unpredictable radical left coalition leading polls and the nationalist far right coming in a consistent third.

Nevertheless: forecast data from the EU Commission produced in February shows recovery finally taking hold in Greece this year and strengthening into next. This is consistent both with the broader European outlook as it stands, and with the consensus – though the latter’s forecasts are more bearish in numbers terms. The road ahead is dangerous but the new bond issue is another step in the right direction. Eurydice is almost at the threshold of Hades; it is now more believable that she will not have to turn back after all.

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