UPDATE 1-Greece gets clever direct for 10-year down payment

Thu Mar 4, 2010 5:28am EST Related News Greece eyes up to 5 bln eur from 10-yr bond-PDMA chiefThu, Mar 4 2010Greece mandates banks for 10-year bondThu, Mar 4 2010Greek/German spread wider as Greece mandates banksThu, Mar 4 2010EURO GOVT-Peripherals outperform on Greek deal talkMon, Mar 1 2010Greek/German 10-year govt bond yield spread narrowsMon, Mar 1 2010

(recasts with demand, market reaction)

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LONDON, March 4 (Reuters) - Greece began selling asyndicated 10-year euro benchmark bond on Thursday, a test ofmarket confidence in its fiscal reforms, and attracted stronginitial demand.

Petros Christodoulou, head of the country"s PDMA debtagency, told Reuters that Greece wanted to raise no more than5.0 billion euros from the issue, but that orders reached 7.0billion euros ($9.5 billion) one hour into book-building.

"We are compensating the markets to re-enter. Our investorsapprove the move. We had said 5.0 billion euros, that"s what wewill take," he said.

Price guidance was in the area of mid-swaps plus 310 basispoints. The bond was mandated to Barcap, HSBC, Nomura, NBG andPiraeus Bank; a bank source close to the deal said it wasexpected to close later in the day.

The sale is a test of the market"s faith in Greece"s abilityto cut its budget deficit. On Wednesday, the governmentannounced 4.8 billion euros of austerity steps.[ID:nLDE6220NA]

Greece needs to refinance about 20 billion euros of debtmaturing in April and May, and officials previously said itsfunding needs were met until mid-March.

In response to Thursday"s launch of the bond, the spread ofthe 10-year Greek government bond yield GR10YT=RR over theGerman Bund yield EU10YT=RR widened only moderately, to 295basis points from 290 bps.

The spread has narrowed sharply from as high as 370 bps lastweek, in anticipation of the austerity measures and in the hopethat rich European Union governments will ultimately extend someform of financial aid to Greece to ease its debt crisis.

Greek bank stocks .FTATBNK rose 1.5 percent in Athens onThursday. "The bond sale suggests that the government is able totap bond markets," said Costas Manolopoulos, a bank analyst atIBG. "This could lead to lower bond spreads, which would be goodnews for banks" profitability," he said.

It is Greece"s second bond issue in the euro zone debtmarket this year. In late January it raised 8 billion euros withthe sale of five-year benchmark bonds.

It paid a hefty premium for that deal of 350 basis pointsover mid-swaps, or 381 bps over German Bunds, with a 6.1 percentcoupon. Greece received investor orders of about 25 billioneuros for that bond. (Reporting by Alex Chambers and George Georgiopoulos; Editingby Andrew Torchia) (andrew.torchia@thomsonreuters.com; +44 (0) 207 542 9782))

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