Emerging market investors to shun Greek bonds: Van Eck

By Walter Brandimarte

NEW YORK (BestGrowthStock) – Greece’s plans to sell itself in the United States as an emerging market country for the first time will likely backfire even if it launches bonds with near double-digit yields, a hedge fund manager with Van Eck Global said on Thursday.

Emerging market investors are intrinsically hungry for risk and juicy yields, but they also have their eyes trained to identify where the next crisis is coming from, argued Eric Fine, who runs a hedge fund focused on emerging markets debt and currencies at U.S. money manager Van Eck.

“Emerging market investors have the stomach but they also have the brain to understand the Greece situation differently than the previous set of (institutional) investors,” Fine, who helps manage Van Eck’s $21 billion in total assets, told Reuters.

“It just doesn’t look as a sustainable situation for us,” he added.

Greece plans to sell a global bond in dollars in the next two months, targeting emerging market investors as Asian and European buyers continue to show less enthusiasm for Athens’ debt.

The U.S. bond sale is part of a plan to raise an additional 11.6 billion euros ($15.5 billion) to cover a gaping budget deficit and refinance old debt as it comes due in May.

Athens insists on finding a market solution for its financial problems, instead of using a promised lifeline offered by the European Union and the International Monetary Fund.

But markets already have grown increasingly uncomfortable with Greece’s plan.

“The idea of Greece raising money in the private market is in the process of being rejected by the market,” Fine said.

Yields paid on Greece’s 10-year global bonds soared to near 7.5 percent on Thursday, according to Tradeweb, while the cost of insuring five-year Greek bonds against default reached a new high of 450 basis points, according to Markit Intraday.

That makes Greece the fifth most expensive country to insure against the risk of default, after Venezuela, Argentina, Pakistan and Ukraine, according to Markit.

In Athens, Greece’s Economy Minister Louka Katseli said on Thursday “there is no chance Greece will default,” but at this point rhetoric will not help the country anymore.

Investors would only feel comfortable to lend to Greece, said Fine, when they see a more explicit support from the European Union and the IMF. But that will not happen before Athens agrees to formally request financial aid, he added.

“The Greek government has to be forced to bring in the EU and the IMF and then the market probably rallies, but it might be short-lived,” said Fine, mentioning lack of clarity and legal concerns on the EU/IMF aid package.

A market rally should also be temporary because, as soon as Greece receives financial aid from multilateral sources, markets will start thinking about the next candidates for state funds — “Spain, Portugal, which everyone has been talking about, but I’d throw Italy and Belgium in there,” said Fine.

With the clock ticking for the Greek government, a final solution might be necessary rather soon. But Fine believes Greek politicians will only act at the last minute.

“There are a number of buttons that say ‘kick can down the road,’ and I think they are going to try to push as many of those as they can. But the can is getting very, very heavy and there is a lot of wind blowing in the other direction.”

(Reporting by Walter Brandimarte; Editing by Phil Berlowitz)

Emerging market investors to shun Greek bonds: Van Eck