1. Introduction

Greece's Public Debt is the responsibility of two Units operating under the supervision of the Minister of Finance.

A. The Public Debt Directorate operates under the General Directorate of Fiscal Policy of the Ministry of Finance. Its main task is the monitoring of Public Debt not only in terms of recording and servicing but notably as a parameter for implementing fiscal policy.

In this context, the Public Debt Directorate:

• is responsible for implementing the guidelines of fiscal policy in respect of public debt, being active in the preparation and implementation of the state Budget;
• is supporting middle and back office operations by:

a) making forecasts and evaluations of the evolution of debt;

b) servicing the public debt;

c) elaborating monthly and annual reports on debt according to the national and European accounting system (ESA95);

d) producing broad statistical information towards state or supranational organizations and pub-lishing periodical reports and bulletins.

• is responsible for the special purpose financing of the Hellenic Republic;
• is representing the Ministry of Finance in meetings with international and European organizations or in International Forums and Committees;
• is responsible for the legislative framework of public debt.

B. The Public Debt Management Agency (PDMA) was established in 1999 as a public entity under the direct supervision of the Minister of Economy and Finance having as a main task the management of the public debt portfolio, and specifically the objectives of:

i) covering the financing needs of the state through the markets;

ii) reducing the servicing cost of the debt;

iii) reducing the assumed market risks by pursuing an optimal composition and duration of the debt portfolio.

In pursuing these objectives, the Public Debt Management Agency (PDMA):

• designs and proposes to the Minister of Finance, the short-and-medium term public debt management policy, within the fiscal policy guidelines;
• is responsible for covering the financing needs of the Hellenic Republic in a most efficient way by managing and executing the annual borrowing program by way of issuing bonds and concluding auctions;
• monitors the domestic and foreign money and capital markets and evaluates the issuance opportunities in line with the management objectives.
• provides financial advice in connection with the conclusion in the domestic or international markets, of loans by organizations and agencies of the broader public sector by monitoring the servicing of such loans, coordinating the timing of their borrowing program and evaluating the effects on public debt and its servicing.

Both Units are in close co-operation.

2. Description of debt instruments

2.1 Marketable Debt

2.1.1 Money Market Instruments

2.1.1.1 Treasury bills

They are euro-denominated securities in book-entry form, issued at discount, with tenors of 13, 26 and 52 weeks. These securities are traded in the regulated secondary market (HDAT). Banks, institutional and retail investors constitute the investor base. In 2010 T-bill issuance constituted the major part of short term financing reaching the total outstanding amount of € 9.4 billion in 31/12/2010... 

2.1.1.2 Commercial papers

Euro Commercial papers Programme

It is used for temporary and unexpected financing of the State Cash Balances, as a Cash Management instrument. They are discounted, book-entry notes denominated in Euro, USD and GBP with tenors ranging from 1 day to 365 days and redeemed at par or at an amount calculated by reference to an index or a formula. They are traded in a regulated secondary market and cleared by Euroclear system or Clearstream Banking or any other recognised clearing system.

2.1.1.3 Other

None.

2.1.2 Bonds

2.1.2.1 Fixed rate income instruments

Fixed rate benchmark bonds are euro-denominated securities issued in book-entry form, with tenors of 3, 5, 10, 15 and 30 years. They are initially issued through syndication (except for the 3 year and the 5 year bond, which may also be issued through auction) and further tapped via auctions in order to enhance liquidity.

They bear annual coupons and are redeemed at par at maturity.

In the first four-month of 2010, short & medium-term bonds were mainly issued for a total amount of € 18 billion. The longest term issued was the 20 year re-opening for amount € 390 million. On 23/04/2010, due to a rapid increase in its debt financing, Greece requested the activation of EU/IMF financial stabilization mechanism (EFSM). Greece received approximately € 31.8 billion loan disbursements throughout 2010. 

2.1.2.2 Index-linked bonds

Harmonised Index of Consumer Prices (HICP) bonds

Greece's presence in the index linked-bond market dates back in 2003 when a euro-denominated 20 year inflation linked bond, due July 2025, was launched. The bond was linked (in terms of principal and interest) to the European Harmonised Index of Consumer Prices (HICP), excluding tobacco, published by Eurostat and calculated by using an Index Ratio. The principal value is fully guaranteed, while income on redemption in excess of the principal value, earned from the principal adjustment due to the evolution of inflation index, is tax exempted. In 2006, this issue reached the amount of € 7.2 billion. In 2007 Greece launched a new euro-denominated inflation linked-bond, due July 2030, with initial amount € 3.5 billion which was further tapped in 2008 reaching the total outstanding amount of € 7.5 billion. There was not any new issue or re-opening of inflation linked bond in 2010.

2.1.2.3 Variable-rate notes

Strategic Issues/Private Placements

Strategic Issues/Private Placements are undertaken on a supplementary basis and represent a lower percentage of the total annual issuance. Such issues allow the Hellenic Republic to differentiate the investor base, to take advantage of demand for specific structures and finally to maintain its presence in some non euro-zone currency markets (such as CHF and USD currencies). They usually take the form of privately placed Floaters or Structured transactions. At the beginning of 2010, a new 5-year floating rate note, due in February 2015, was issued through Private Placement for an amount of € 2.02 billion. After the activation of the European Financial Stabilization Mechanism (EFSM), there were no other issuances in this category. 

2.1.2.4 Other

None.

2.2 Non marketable debt

2.2.1 Savings Bonds

None.

2.2.2 Other

Bank of Greece loans/ Special purpose & bilateral loans / EFSM loans /other domestic & external loans.

During 2010, there was a remarkable increase of non-marketable debt due to:

a) EFSM loans (€ 31.8 billion);

b) off-market swap with Goldman Sachs reclassification according to ESA95 (€ 5.2 billion) and;

c) debt assumption of ELGA & OPEKEPE by Ministry of Finance (€ 3.2 billion).

3. Selling techniques

Techniques used for placing securities

Techniques used for issuing and placing securities are the following:

Auctions: This issuance technique is mostly used for issuing short term bonds and T-bills and subsequently for re-opening of longer maturities of fixed rate bonds initially issued through syndication. Only the appointed Primary Dealers are allowed to participate in the auctions submitting both competitive and non-competitive bids. From 1/1/2009 all auctions are of the competitive/cut off price type, according to the modification of the Primary Dealers Operation Regulation.

Auctions are conducted through the Electronic Trading System (HDAT) and are announced on the issuance calendar.

Auctions are taking place on Tuesdays (usually once a month). The settlement date for both the primary and secondary market is three days after the trade date (T+3).

Syndication: This bond issuance technique is used for the initial issuance of medium and long term bonds as well as for inflation-linked bonds.

Apart from achieving benchmark status at issue, syndicated issues facilitate control of initial allocation with high priority to long-term holders such as insurance companies, pension funds, etc.

Public Subscription: This technique has been introduced in both T-bills and bonds auctions, so that retail investors can directly have access to government securities at the cut off price of the auction for a pre-defined amount per investor. Retail investors can additionally buy an unlimited amount within five days after the auction but at the price offered by the banks. Government securities acquired by retail investors in the ways described above are tax-exempt, if kept till maturity.

Secondary Market: Important steps were taken in the Electronic Secondary Market (HDAT) to eliminate defective transactions, as well as trade cancellations due to technical faults.

EuroMTS: Greek Benchmark Bonds (over € 5 bln per benchmark) are also traded in the EuroMTS. Currently, 24 government bond series are traded in this platform.

Primary Dealership

Primary Dealers are appointed and evaluated by the Committee for Supervision and Regulation at the end of each year, according to the PDs Operation Regulation.

There are 22 institutions acting as Primary Dealers for government debt, of which five are local and the rest international.

According to the Regulation, Primary Dealers (PDs) must participate in each of the primary and secondary market by a percentage of at least 2% of the total volume of transactions, weighted by duration.

Furthermore final actions have been taken in PDs reports harmonization. The reports which will be submitted uniformly by all PDs across the euro area will include all transactions (buy and sell) of government bonds in the primary and secondary market, broken down by type of counterparty, location and instrument.

4. Other information

4.1 Valuation of debt instruments

Nominal value (including swap transactions).

4.2 Fiscal year

Calendar year.

4.3 Estimates

None.

4.4 Maturity structure

Residual Maturity.

4.5 Duration

Both Duration and Modified Duration are calculated for government bonds and bills only, not including swaps.