The recent turmoil in global bond markets is certainly affecting the plans of the Greek Public Debt Management Agency (PDMA), but is not of concern at this time.
The new environment requires patience until market volatility subsides and the European Central Bank responds to it, if necessary. Indeed, Greece’s cash reserves remain high and sufficient to support the country’s additional fiscal measures, while the 30-year paper swap movement by the PDMA in January and the issuance of the new 10-year bond mean that the agency has already pulled 5.5 billion euros and adheres to its plans for foray into the market every quarter of the year.
Today, the so-called cash buffer stands at 33 billion euros and is expected to end the year between 22 and 25 billion euros. This means that it can shoulder the burden of the € 11.2 billion in measures planned by the European Commission, with continued support from the ECB’s extraordinary bond purchase program (PEPP); Frankfurt could acquire up to € 20 billion of Greek bonds over the next 13 months, allowing for a slight increase in issuance activity to € 12-14 billion this year.
All of this means that the PDMA can afford to wait and see how the volatility of international bonds evolves, while any action by the ECB such as increasing the weekly rate of PEPP purchases or even the expansion and possibly the extending its portfolio of 1.85 trillion euros can only be favorable for Greece.
The only thing the PDMA does not want to see is prolonged volatility and therefore uncertainty for investors, as this tends to hurt Greece more as its debt does not have investment grade status. A temporary rise in yields is not seen as a big blow, as even after the recent surge, the benchmark 10-year yield remains below the level it was just before the pandemic began in early 2020.
The goal of all of PDMA’s forays into the market is to achieve interest rates below the average long-term cost of borrowing, which is around 3.4%, as they improve debt sustainability. Greek.