January 2010 started with a bang. New decade, new era, new mood. Bond issuance was buoyant, spreads continued to tighten and everyone believed the end of the downturn was nigh. However, barely four weeks into the new year, the atmosphere in the markets began to sour. It started in the Balkans.
On January 25, Greece launched its €8bn five-year bond, attracting more than €20bn of orders. The issue was priced at a spread of 350 basis points (bps), considered high but fair. But within a few days of launch, the spread had widened substantially and by early February there were fears of an imminent crisis.
