STRONG DEMAND FOR GREEK GOVERNMENT BONDS CONTINUES IN 2021
2021 started with marginal losses for the Piraeus Bank government bond index, halting the upward trend that began in the last months of the previous year. In particular, the index closed 2020 with a 10% increase but dropped marginally by 0.37% in January, reaching 696 points. Given the significant upward trend in Greek bond prices in 2019 (30%) and 2020 (10%) and the much weaker government bond returns in the Eurozone over the same period, a mild slowdown in the Greek bond market was expected. In this context, with the support of the PEPP program of the European Central Bank to continue until March 2022, the weighted average YtM of the index remained at 0.55% in January, while the spread with Germany’s 10-year bond yield stabilized at 120 basis points.
The exit in the markets for 2021 with a new 10-year bond was crowned with success, recording a significant oversubscription ratio of 8.4 times the €3.5 billion amount raised with a coupon of less than 1% for the first time to 0.75%. This issue is the first according to the plans by the Public Debt Management Agency (PDMA ) to proceed with four to five issues for this year with the aim of raising €8–12 billion, most likely with bonds longer than 10 years and always in accordance with market conditions. Clearly, the demand for Greek government securities remains strong, as the coverage of the new 10-year bond was at the same level as that of the issue of the 15-year bond in October last year and considerably higher than that of the two previous issues/re-openings of 10-year bonds.
As expected, Fitch maintained the credit rating of Greek sovereign debt at BB with a stable outlook; however, shifting the focus away from the level of debt and to its service costs and the growth dynamics of the economy, which is expected to develop more dynamically in the second half of the year. The next scheduled credit rating reviews are in mid-March by DBRS and Scope and on April 23rd by S&P.
The upward trend of the last few months for the corporate bond index continued, recording a new high at 142 points and increasing on a monthly basis by 0.75% and 1% in December and January, respectively. However, the increase in the index was based more on the unprecedented positive performance of Intralot bonds due to the announcement of the debt restructuring agreement than on the returns of the majority of the bond members in the index. Specifically, the bond maturing in September 2021 recorded profits of 42%, while the price of the bond maturing in September 2024 increased by 17.5%. In contrast, one-third of the index bonds recorded negative returns in January, with the worst performances recorded by Aegean, B&F and Ellactor. Accordingly, the weighted average YtM of the index, which is less sensitive to dramatic movements in the Greek corporate bond market, recorded an increase of 21 bps in January to 2.75%