New Greek government bond prices officially opened trading Monday at heavily discounted levels, showing investors have already taken a pessimistic view of the country's finances despite the recently agreed debt exchange.
According to prices on Tradeweb, the new series of Greek government bonds are being quoted around 22%-26% of face value, price levels that are normally associated with heavily distressed debt.
Under the debt exchange, private-sector investors will swap their old bonds for new ones with less than half the face value, lower coupons, and longer maturities, effectively writing off EUR105 billion in Greek debt holdings
The new Greek government bonds have a range of maturities between 11- and 30-years, with step-up coupons. These coupons range from 2% up to 2015, 3% from 2016 to 2020, 3.65% in 2021 and 4.3% between 2022 and 2042.
"Looking ahead, we would expect concerns over Greek sustainability to mount, and possible rapidly so, even in the wake of the debt deal. Implementation risk remains high while, even were the next government to remain committed to austerity, the ongoing contraction of the economy threatens to quickly reveal the optimistic nature of the new debt target--120.5% of GDP in 2020," noted analysts at Rabobank.
However, not all market participants are bearish about the new Greek debt, with one trader highlighting some early pockets of interest in the sector.
"There has been some buying from asset managers who are likely looking at a five to 10 points increase in prices from these levels," the London-based trader noted, adding "however, retail investors have not got these bonds yet and they may look to sell their bonds once they get possession."
Highlighting the difficulties that lie ahead, the new Greek yield curve is currently inverted--a situation where yields at the short-end of the market are higher than at the longer-end--which points to heightened near-term risk.
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