According to a Goldman Sachs executive, the outlook for the bond market in Greece remains favorable despite the abundance of transactions in 2024
2024 was a turning point for Greek bonds, as there was higher demand from foreign investors and even from investors who had bought Greek securities for more than 10 years.
According to Riccardo Abbona, Managing Director Head of DCM & Risk Solutions, Greece & Italy – Barclays the new composition of the investment base was also confirmed by the addition of 26 new accounts to the list of Top-50 investors for Greek bonds in 2024. In 2024, Greece/GDR, given the achievement of the investment grade of 2023, proceeded with two very successful new OED reference issues with a duration of 10 and 30 years old. Through these two syndicated bond issues, Greece raised 4 billion. euros and 3 billion euros respectively, a record amount in terms of issued amounts and at the same time expanded the base of real money investors by 30%, having achieved new records in order book size, investor quality and reducing lending margins.
In the bond market, we had a record year for Greek Banks with bond issues of 7.7 billion. euros compared to 4.2 billion in 2023. The most basic parameter for this success was the achievement of the investment grade for the banks which significantly contributed to the expansion of investors investing in Greek bank bonds. For example, the new National Bank bond was priced with a margin of 130 points compared to the 330 points margin of the 2020 issue. Also important for the general investment climate in Greece was the very successful issuance of a 30-year bond by ODDIX in May.
In the corporate sector we saw a re-emergence of Eurobond issues by Greek companies after a two-year absence such as PPC, Hellenic Petroleum, as European spreads for BB credit rating reach their lowest levels in recent years. According to Alpha Bank, the Greek government bond index records in 2024 the second highest total yield (after Italy) among the countries of the Eurozone. The spread between Greek and German 10-year government bond yields stood at 78 basis points on December 9, the lowest level since 2008. According to Alpha Bank, the good performance of Greek bonds is mainly due to the favorable fiscal situation of the country, in the upgrading of the country’s creditworthiness to the investment grade and in the increased willingness to take on risk.
The primary surplus is estimated for 2024 at 2.5% of GDP and in 2025 it is forecast to be at 2.4% of GDP. One point the bank points out is that the country’s financing needs are limited in 2025 and are expected to be covered by bond issues. On the other hand, the trend of the debt-to-GDP ratio remains downward with the average maturity being significantly higher (19 years) compared to the rest of the Eurozone countries (average 8 years), demonstrating that for the next five years refinancing needs are under control of debt. It is noted that a small part of the debt is negotiable, as only 30% is held by the private sector, while 70% is in the European mechanisms and in bilateral loans. Therefore, the analysis continues, the lack of government bond supply combined with increased demand due to the favorable fiscal outlook has led to an outperformance of Greek government bonds.
According to the BoE, the effect of the upgrades, mainly coming from increased demand from international investors, continued in 2024 and explains the decline in Greek government bond yields by around 110 bps. from the beginning of 2023, in addition to the reduction caused by the formation of expectations for a reduction in key interest rates, which corresponds to an additional 70 bp. about.
Thus, the yield differences of Greek government bonds compared to other government bonds of the eurozone have decreased significantly. Specifically, the yield difference (spread) of the Greek ten-year bond against the corresponding German bond was around 81 bp. on 13.12.2024, about 114 m.v. lower than its average level in the first quarter of 2023, i.e. before forming expectations for an imminent upgrade to the investment category. Also, the yields of Greek government bonds have also decreased compared to other eurozone bonds with a comparable rating, such as Italian government bonds (indicatively, the difference between Greek and Italian ten-year bonds was -33 bps on 13.12.2024, compared to – 11 p.m. on 1.1.2023).
The prospects for 2025
There are still several catalysts that could maintain the positive course of Greek bonds in the next year as well. In principle, the supportive macroeconomic environment, with prominent continued fiscal outperformance, strengthens the scope for further upgrades of the Greek debt rating in the next two years 2025-2026. In addition, the acquisition of Investment Grade combined with political stability – which is a key condition for maintaining investor interest, have benefited both the real economy and the Greek Capital Market.
The government expects further upgrades of the country’s credit rating from the rating agencies. The government is trying to send another positive signal to the markets for the Greek economy with the plan for the fastest reduction of the country’s public debt, which is in full swing. The policy of early repayment of public debt will continue in 2025. The government within the next year will proceed with the early repayment of loans amounting to 5 billion. euros from Greek Loan Facility loans that would mature between 2033 and 2042.
The main goal of these moves is to reduce the country’s public debt faster in the coming years and for Greece not to be the Eurozone country with the highest debt as a percentage of GDP. According to forecasts, public debt from 163.9% of GDP at the end of 2023 is estimated to decrease to 154% of GDP at the end of 2024, to be further reduced to 147.5% of GDP at the end of 2025. The IMF taking into account the country’s fiscal progress and the growth rates of the Greek economy, he has predicted that the debt reduction will amount to 30 units of GDP by 2029.
Within 2025, Moody’s is expected to upgrade the country to investment grade, (the only house that has not given investment grade 0 which will maintain the demand for Greek bonds, according to Alpha Bank. Moody’s rating agency in September revised to positive from stable the perspective of the country’s credit rating (Ba1), highlighting the best of the budget execution estimates and the improvement of the banking sector.
Mr. Dimitris Kofitsas, Head of Greek Investment Banking at Goldman Sachs International, speaking at the recent Capital Link conference in New York, the outlook for the bond market in Greece remains bright despite the abundance of transactions in 2024, this is due to political stability and higher degrees of development of our country in relation to other European countries as well as the recent success of transactions in 2024 that left foreigners investors very satisfied.
