Two years after it nearly crashed out of the Euro zone, Greece returned to the bond market this week with yield-hungry investors rushing to buy its debt in a 3-billion Euro deal that could mark the beginning of the end of its bailout. Athens offered a yield of just 4.95% to sell five-year bonds, the second lowest borrowing costs for a bailed-out Euro zone state returning to market.
The bond, the first since its EU/IMF bailout began four years ago, attracted more than 20 billion Euro of interest from over 550 investors, including 1.3 billion from lead managers.
The Greek bond is attractive to investors because it offers a relatively high return in an era of ultra-low interest rates. Expectations that the European Central Bank will take further steps to boost the Euro zone economy are also fuelling appetite for bonds issued by the bloc's riskier countries.
Greece's government said the sale marked the beginning of the end of the tough austerity linked with its 237-billion Euro bailout, which pushed unemployment to a record 27.5% and wiped out almost a quarter of the economy.
Greece is leaving the bailout and the crisis behind, deputy Prime Minister Evangelos Venizelos told reporters. Athens considers the sale as part of gradual return to markets. It does not expect to cover all its funding needs from investors before 2016.
The country's creditors also welcomed the move, saying it vindicated the tough economic policies endured by Greece and would bolster sentiment throughout Europe.
It's extremely good news... and it will reinforce confidence in Europe to overcome the crisis, European Competition Commissioner Joaquin Almunia told reporters.
Greece is the third bailed-out Euro zone country to return to the markets after Ireland and Portugal. Its borrowing costs, however, remain the highest in the Euro zone. Irish, Spanish and Italian 10-year yields were all 5 basis points down on the day at 2.90%, 3.16%, and 3.15% respectively.
An Irish sale of 1 billion Euro of 10-year bonds also drew solid demand at a yield of 2.917 percent at its second regular auction since exiting its bailout in December.