GAINS FOR GREEK GOVERNMENT BONDS AND ISSUANCE OF NEW 5-YEAR BOND
The Greek government bond market showed an upward movement in March in light of the slowdown in inflation and the revision to positive of the credit rating outlook by Moody’s. In particular, despite the pressures observed last month on the Piraeus Bank Government Bond Index, there was no corresponding deterioration in domestic macroeconomic fundamentals and economic climate indicators. As a result, the index recorded gains of 1.74%, reaching 574 points at the end of the month. Accordingly, the index’s weighted average yield fell below 4%, falling 23 basis points (bps) to 3.91% at the end of March. In this context, with the issuance of a new 5-year bond, the Public Debt Management Agency (PDMA) managed to raise €2.5 billion from the markets with a coupon of 3.875%; demand exceeded the offered amount by approximately eightfold. It is worth noting that the agency’s financing programme for 2023 bond issuance has already been covered at 86% in the first quarter of the year.
Regarding the individual bonds in the index, the largest change in yields was recorded in the bond maturing in 2052 (30 years), which was found to be 3.4% higher than in February. The bonds maturing in 2042 and 2037 moved similarly, recording gains of 3.34% and 2.95%, respectively. As a consequence, by the end of March, the interest rate curve recorded a downward shift in the mid- and long-end parts of the curve in the range of 15–30 bps for maturities of between 10 and 30 years.
Accordingly, the interest rate spread of the Greek 10-year benchmark bond against the corresponding German bund recorded an increase in March by 13 bps to 193 bps, with valuations based on fundamental factors of the Greek economy, pointing to a marginal widening of the spread from current levels over the next few months. In particular, despite the marginal strengthening of risk aversion tendencies according to investment risk indicators in the EU, the improvement of Greek economic climate indicators compared to those in Germany in March led to marginally lower valuations, with the current ‘fair’ price for the 10-year spread standing at 205 bps.
The Piraeus Bank Corporate Bond Index also recorded marginal gains in March, with the index's weighted average yield decreasing by 7 bps to 4.55% and the index’s price increasing by 0.26% to 137.6 points at the end of the month. Its individual bond members showed mixed trends, with the majority of bonds (60%) posting losses; the biggest decliners were Friggoglass (maturity 2025), Lamda Development (maturity 2029) and Gek Terna (maturity 2027), which decreased by 2 .72%, 2.1% and 2%, respectively. On the contrary, the bonds of CPLP (maturity 2026), Coca Cola (maturity 2031) and Prodea (maturity 2028) moved positively, with monthly returns of 2.8%, 2.1% and 1.2%, respectively. In addition, Fitch upgraded the credit rating of Mytilinaios to BB+ from BB with a stable outlook.