Muted Euro-Zone Bond Supply Benefits Greece
By EMESE BARTHA
Of DOW JONES NEWSWIRES
FRANKFURT -- A relatively muted scheduled government bond supply in the euro zone is expected to open the door for Greece to come with its planned 10-year syndicated bond issue next week, giving investors a fresh chance to show how they differentiate among peripheral sovereigns.
"As some of the peripherals have successfully issued bonds, we believe the way is paved for Greece--at least to the extent possible," said David Schnautz, strategist at Commerzbank AG in Frankfurt, referring to Portugal's EUR3 billion of 10-year and Spain's EUR5 billion of 15-year syndicated issues this month, which were both well-received.
Scheduled bond supply, excluding Greece's possible issue, is expected to total about EUR16 billion next week, which has to be absorbed without the help of redemptions or coupon payments. Issuers include Slovakia, Belgium, the Netherlands, Portugal and Italy.
The bond sales for the other countries may be less of a hassle, but Greece once again probably will have to pay a decent premium, as was the case with its EUR8-billion, five-year issue in January, market watchers say.
With Greece's issuance and the European Union's first assessment looming, it is hard to see yield spreads between Greek government bonds, or GGBs, and German bunds narrowing too far from here, said Jamie Searle, strategist at Citigroup.
"We think the near-term risks are skewed towards widening," he said in a note. It is "extremely difficult" to assess how much GGB-Bund spreads would widen to accommodate a new Greek bond, Searle said.
Commerzbank's Schnautz said that following large issuances by the peripherals at the end of last week and during this week, Portugal's decision to reopen a bond next week already "suggests that investor demand is solid at current spread levels."
In a clear sign investors differentiate among euro-zone sovereigns, strategists at Credit Agricole CIB have calculated that auction concessions in 2010 aren't as large as in the first quarter of 2009 for many issuers.
Pre-auction cheapening of bonds is a normal phenomenon as primary dealers, who deal directly with a country's debt agency, make room for new paper in their books. The size of this cheapening depends on various factors, including the actual perception of a country by investors.
"For those issuers outside of the focus of the sovereign credit crisis--and according to the concessions at auction...auctions have not proved too difficult so far compared to 1Q 2009, with Italy and Ireland's concessions both smaller this year," Credit Agricole's strategists say. Austria, which this time doesn't have to deal with the issue of exposure to Central and Eastern Europe, as it had to a year ago, has been able to issue paper comfortably, as have the rest of core issuers, they said.
Slovakia on Monday will launch the new series of 3.50% February 2016 bond with an open amount. The same day, Belgium will sell EUR2.5 billion to EUR3.5 billion of the OLO 3.50% March 2015, OLO 3.75% September 2020 and OLO 4% March 2022 bonds.
Tuesday, the Netherlands offers up to EUR2 billion of non-benchmark DSL 2.50% January 2012 and DSL 4% July 2016.
Wednesday, Italy will sell EUR0.75 billion to EUR1.25 billion of the inflation-linked BTPei 2.35% September 2019, and the same day Portugal offers EUR1 billion of the OT 3.35% October 2015.
Thursday, Italy launches the new floating rate bond CCT March 2017, along with the sale of further tranches of the BTP 2% December 2012 and BTP 4.25% March 2020, with the target volumes to be announced Monday. |
