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UPDATE 2-Germany, Greece see lower demand for debt sales in nervous market

UPDATE 2-Germany, Greece see lower demand for debt sales in nervous market

reuters.com · 09/01/2021 05:42
UPDATE 2-Germany, Greece see lower demand for debt sales in nervous market

Recasts, adds details, Greek debt sale

By Yoruk Bahceli

- Germany and Greece launched syndicated debt sales in a nervous market on Wednesday and saw lower demand than for their previous issuances.

Euro zone bond yields, which move inversely to prices, have risen sharply this week, driven partly by unease following hawkish comments from several European Central Bank policymakers on the future of the bank's pandemic emergency bond purchases. nL1N2Q30H2 nL1N2Q20LW

Germany received more than 18 billion euros of demand for the sale of the 5.5 billion euro bond, which priced for a yield of 0.159%, according to lead manager memos seen by Reuters. Its finance agency will retain 500 million euros of the bond, the memos showed.

The deal received less than half the 39 billion euros of demand Germany saw for a 30-year green bond syndication in May though green debt sales tend to see higher demand as they cater to a specialist investor base seeking environmentally-friendly assets. nL8N2MY27H

Greece, which tapped outstanding five and 30-year bonds to raise 2.5 billion euros, received 18.9 billion euros of investor demand, lead managers said, with demand split roughly equally between the two bonds, which raised 1.5 and 1 billion euros respectively.

Though demand was more than seven times the issuance, it still fell short of the 29 billion euros of demand Greece saw for a 10-year bond tap in June that had also raised 2.5 billion euros. nA8N2MZ009

The sale came as the gap between 10-year Greek bonds and their German equivalents - effectively the risk premium on Greek debt - reached its widest on Wednesday since May, at 115 basis points. DE10GR10=RR

In syndications, borrowers hire investment banks to sell the debt directly to end-investors, allowing them to target a larger investor base and raise bigger size. They also allow investors to get hold of bonds in size and receive a new issue premium.

Germany, which in the past rarely issued debt through syndications, started issuing bonds more regularly in this format last year as its funding needs ballooned due to the pandemic.

The spread Germany offered investors tightened from 3 basis points over an outstanding bond due Aug. 15 2050, down from around 4 bps when the sale started earlier on Wednesday, according to earlier memos.

It will price the shorter bond at 38 bps over the mid-swap level, and the longer at 135 bps over the mid-swap level, according to lead manager memos, down from around 43 and 145 bps respectively when the sale started.

Germany hired Barclays, BofA, Deutsche Bank, Morgan Stanley, JP Morgan and UniCredit for its sale, while Alpha Bank, Barclays, Citi, Commerzbank and Morgan Stanley managed Greece's deal.


($1 = 0.8463 euros)


(Reporting by Yoruk Bahceli, additional reporting by Dhara Ranasinghe; editing by Sujata Rao , Emelia Sithole-Matarise and Gareth Jones)

((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))