Exclusive: Greek Debt Head: A Moody’s Upgrade to BBB- Could Trigger €3-5 Billion in Additional Demand

20 November 2024

By Marta Vilar – ATHENS (Econostream) – An upgrade of Greece’s credit rating to investment grade by rating agency Moody’s could lead to €3-5 billion in additional demand for Greek debt, said Dimitris Tsakonas, Director General of the Public Debt Management Agency of the country.

In an interview with Econostream on November 8 (transcript here), Tsakonas said that if Moody’s were to grant Greece the investment grade rating, ‘rough estimations say that the potential increased appetite could be, perhaps, €3-5 billion due to changes in the composition of indexes for passive investors.’

This could result in a tightening of the spreads of ‘probably 10-30bp or more’, he said.

Asked about the impact that S&P Global’s and Fitch’s upgrade to investment grade had on demand for Greek debt, Tsakonas said that there was a 30% expansion of the real money investor base and an 80bp tightening of spreads vs swaps rates, which equated to a present value of about €40 billion for Greek debt.

In 2025, the Greek PDMA would follow an issuance strategy similar to that of 2024, he indicated.

‘We will have close to €11 billion of gross financing needs and will have to reinvent the wheel’, he said regarding 2025 issuance. ‘Most probably, the actual primary surplus in cash terms will be close to €7 billion, so the remaining room for funding activity will be €3-4 billion’.

Such low funding allowed Greece to potentially deliver an additional early repayment of the Greek Loan Facility next year, he stated.

‘We will try to have an additional early repayment next year of some €5 billion, if possible even more’, he said. ‘If all the 15 countries that lent us money on the GLF are on board, a potential early repayment will take place in December 2025’.

‘In principle I think we have an agreement’, he added.

Regarding potential buybacks, the PDMA could deliver some on official sector debt in order to replace these with tradeable securities, he said.

This would help ‘to improve the secondary market liquidity, to provide supply and to fill the gaps across the maturity spectrum’, he said.

Asked about any potential buybacks in the tradeable portfolio, Tsakonas answered that this ‘remains to be seen.’

The market could expect ‘more or less’ two syndications in 2025 and it would seem ‘logical to proceed with a 10-year bond issuance’, he said.

‘Around 70-80% of our funding activity would take place through syndicated bond issuances and the rest through our regular bond auction calendar’, he said.

Despite being ‘keen’ on and ‘familiar’ with green bonds, he reiterated that issuing these securities, but also others like inflation-linked or foreign currency bonds, could result in ‘more fragmentation’ of the Greek yield curve.

‘[W]e don’t have enough gross financing needs and green projects which are not already funded by other sources to do it [issue a green bond]’, he said.

Asked about the tightening of the Greek spread with the German bund, Tsakonas said he expected more narrowing.