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Greece to end its bond market exile on Thursday | ASHARQ AL-AWSAT English Archive 2005 -2017
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An EU and a Greek flag fly in front of the ancient Parthenon temple, in Athens, on Wednesday, April 9, 2014. (AP Photo/Petros Giannakouris)

An EU and a Greek flag fly in front of the ancient Parthenon temple, in Athens, on Wednesday, April 9, 2014. (AP Photo/Petros Giannakouris)

An EU and a Greek flag fly in front of the ancient Parthenon temple in Athens on April 9, 2014. (AP Photo/Petros Giannakouris)

London and Athens, Reuters—Greece, at risk of crashing out of the euro zone just two years ago, will issue its first sovereign bond in almost four years on Thursday, seeking to send a strong political and economic signal it is on the way out of its debt crisis.

International banks have been mandated to sell a benchmark five-year, euro-denominated bond under British law, with the sale to be completed “in the immediate future,” the country’s finance ministry said in a statement.

According to sources speaking to Reuters and Thomson Reuters news and information service IFR, pricing is set for Thursday. Two investors said Greece was sounding out an indicative yield of 5.25 percent to 5.5 percent.

“We aim to raise up to 2.5 billion euros on Thursday,” one government official said. “It will be a great success if the coupon is below 5.3 percent.”

The sale is an important milestone for one of Europe’s most troubled economies. The last time it sold bonds, as opposed to very short-term paper, was back in March 2010.

Greece has been since kept afloat by 218 billion euros of European Union/International Monetary Fund bailout money and about 15 billion euros of treasury bills.

Athens has no pressing funding needs but wants to test the waters for more and bigger bond sales in the future, as part of its strategy to cover all its funding needs from the market by 2016.

The sovereign has hired Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs International, HSBC, JP Morgan and Morgan Stanley to arrange the deal.

Athens originally planned to tap bond markets in the second half of the year, after more tangible evidence that its ongoing, six-year recession is over.

But rapidly falling bond yields and pressure to produce an economic success before the European Parliament elections in May have persuaded Prime Minister Antonis Samaras and his fragile coalition government to bring the sale forward.

In a dramatic turnaround, existing Greek 10-year bond yields dropped below 6 percent for the first time in four years on Wednesday, down from about 40 percent two years ago, when Athens imposed severe losses on private bondholders in a 130-billion euro restructuring

On Tuesday, foreign investors also snapped up about 80 percent of a 1.3 billion euro six-month T-bill issue.

Greece’s debt currently stands at about 320 billion euros, or 175 percent of GDP. It is rated nine notches below investment grade at Caa3 by Moody’s. Standard and Poor’s and Fitch rank Greece six notches below investment grade at B-.

But despite its size, the country’s debt is attractive to investors because its 2012 restructuring has made it sustainable for ten years, the head of euro zone rescue fund ESM Klaus Regling said on Saturday.

About 80 percent of Greece’s debt is in the hands of the European Union and the International Monetary Fund, at very low interest rates and on a long repayment schedule. Private creditors are holding just about 30 billion euros of bonds with maturities between 10 and 30 years.

The Greek opposition opposed the bond sale, accusing Samaras of acting hastily on party-political motives. “Going out to markets is one thing. Exiting the crisis is another,” said the Democratic Left party. Samaras’s ruling coalition has a parliamentary majority of just two seats.

Public anger about the economic pain in still running high Greece, which has seen unemployment soar to nearly 28 percent and almost a quarter of whose economy was wiped out in the austerity-fueled recession.

Labor unions staged a nationwide strike on Wednesday to protest against austerity policies imposed on the country by its foreign creditors, including Germany, whose Chancellor Angela Merkel will visit Athens this week.

“All the joy about the bond market exit shouldn’t make us forget that 1.5 million people are unemployed in Greece,” said Nikos Koutsoukis, senior official at GSEE, the country’s biggest private sector labour union.

For all the green shoots, it is too early to talk about long-term economic stability. Thousands of businesses closed across Greece last year.

But economic data released on Wednesday add to evidence that its economy is bottoming out after six years of recession that wiped out almost a quarter of its gross domestic product.

Industrial production rose in February at an annual pace of 1.7 percent, the first time the reading rose for a third consecutive month since the end of 2007.

PPC, the country’s biggest power producer is set to become later this month its first state-controlled company to issue a bond since the debt crisis erupted.