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Greek Fixed Income Monitor - May 2017

Greek Fixed Income Monitor: A New Era for Greek Bonds

In May, government bonds remained at relatively high levels despite the slowdown in the Government Bond Index after the Eurogroup on 22nd May. In particular, the index rose by 1.74% compared to the previous month, reaching 452.63 points at the end of May. Furthermore, the index recorded a new high of 465.56 points in the first two weeks of May. Following the Eurogroup on 22nd May and the difficulty of finding a solution for the medium-term debt measures, the markets kept a “wait and see” stance, with the index ranging between 450 and 460 points during the last week of May.

The Eurogroup on 15th June ended with a successful conclusion of the second programme review as expected by the markets, but the decisions on medium-term measures on debt and the prospect of the country’s return to bond markets remains uncertain. Nevertheless, Eurogroup's decisions were welcomed by bond markets, with the 10-year bond yield declining below 600 basis points to 5.68%, and the 2-year bond yield reaching a new record low at 4.69%.

The slight downward trend in government bonds at the end of May did not affect the Greek Corporate Bond Index, which continues to move upwards, reaching a new record high at 131 points at the end of May. Specifically, the Corporate Bond Index recorded a monthly increase by 1.34% from 129.1 points at the end of March, while compared to the beginning of the year it has increased by 3.09%.

These developments maintain the prospect of upcoming issues of new corporate bonds, which are expected to follow the bond issues of Sunlight and Mytilineos in June. Specifically, with regard to the first issue, the offer of 50,000 bonds was oversubscribed, with the company raising €50 million with a 4.25% coupon. If the demand for this issue is indicative of the total demand for Greek bonds, then similar results are also expected for the Mytilineos’ bond issue worth €300 million and maturing in 2022.