A huge window of opportunity opened up in 2020-2021 by the fiscal and monetary policy response to the pandemic outbreak, which has created an unprecedented environment of cheap money for governments and businesses, with even short-term Greek bond yields approaching negative. closed. The European Central Bank raised interest rates for the third time this year and to the highest level in more than a decade, and it is expected to continue raising rates until at least early 2023, with a market estimate of 2.75% for the final rate. -3.0%.

“Regular” Greek government bond issuances have been essentially “frozen” since May, when ECB interest rates were still negative, and in anticipation of the rise that began in July, when the Public Debt Management Agency took only limited steps to increase the liquidity of existing issues, and also alternative methods of financing, such as re-issuance through an auction of bonds with a floating interest rate.

Accordingly, since the beginning of the summer, the movement of Greek companies has also “frozen”, and the wave of corporate bond issues, typical for the previous two years, has stopped.

The new interest rate environment is making it increasingly costly for businesses to raise capital from the markets, and at least until spring 2023, that cost will continue to rise. “2022 is branded as the year of the biggest losses in the bond market,” Ilias Zacharakis, managing director of Fast Finance, tells K. “Holders of bonds with zero interest rates for so many years forgot what an accounting loss would mean in their portfolios. The market knew and expected what would happen, and the 2020-2021 timeframe was seen as a window of opportunity. Many companies rushed to issue bonds before interest rates began to rise, but they miscalculated the energy crisis, which was the icing on the cake, resulting in a more aggressive central bank policy due to high inflation.”

The ECB raised interest rates for the third time this year and to the highest level in more than a decade, and it is expected to continue raising rates until at least early 2023.

Only four new bonds have been listed on the Athens Stock Exchange since the beginning of the year (Premia in January, Safe Bulkers in February, Lamda Development in June and CLPL in July) – excluding banks (Eurobank and Alpha Bank) – almost half of which were introduced in 2021 only 530 million euros were raised, while, apart from Coca-Cola bonds, no international Greek debt (traded on international markets) was issued.

The pressure on the prices of the 20 Greek corporate bonds traded on the Athens Stock Exchange this year is strong, though not extreme, reaching 13%. As of Thursday, October 27, all bonds listed on AA are trading below par, with the exception of Lamda Development (maturity) 2029 and B&F, while Coral is trading close to par. The largest price drop, more than 10%, was recorded by Noval Property, Premia, ELVALHalcor, Prodea, Motor Oil and GEK TERNA bonds (maturity 2028).

In terms of yields, growth is explosive, while the Greek state’s cost of borrowing, reflected in 10-year bond yields, has more than tripled this year and is approaching 4.7%, its highest levels. since 2017, when the Greek corporate bond market actually started to grow. Current yields to maturity are up more than 100% year-to-date for Premia, Motor Oil, OPAP and ELVALHalcor, while almost all securities posted significant gains except for Lamda Development bonds. (expires 2029) to see a decline, with the B&F (low market attractiveness) title only marginally up.

“The scene is explosive and at this stage it is difficult for any company or government to make a decision to enter the markets unless there is an absolute need or an older name will expire,” emphasizes Mr. Zacharakis.

Although most large companies have large funds with low borrowing costs, there are also times when they want to make larger investments when the cost of borrowing becomes prohibitive. “As interest rates rise, investments with high borrowing costs carry a significant degree of risk. After all, raising interest rates is designed to cause a recession in order to balance inflation, ”he emphasizes. To see the bond market again enter the bond market for new borrowing from many companies or even the state itself, he estimates, we need to see a normalization of the situation and an environment in which interest rates can be reduced.