Greece is selling bonds again, but they’re not out of the woods yet.

Greece successfully returned to the bond market Tuesday after a three-year absence with the sale of a five-year bond. Analysts have applauded the timing but caution the country is still in the hands of international creditors.

A protestor holds a banner outside the Greek parliament during in a demonstration by municipal contract workers in Athens, Greece, on Thursday, June 29, 2017.

The Greek Debt Agency issued a 3 billion euro ($ 3.5 billion) five-year bond maturing in 2022 with a yield of 4.625 percent. The bond was oversubscribed with orders of 6.5 billion euros, confirming what sources had told CNBC earlier.

Tuesday’s bond sale is a key milestone for the troubled Greek economy, which has been under economic surveillance since 2010. Athens tapped the markets in 2014, but shortly after the country was asking for a third financial bailout. The Greek government says this time is different and Athens is seeing the light at the end of the tunnel.

The Greek finance ministry wasn’t immediately available for comment when contacted by CNBC Tuesday.

In an interview with the Guardian on Monday, Prime Minister Alexis Tsipras said: “We can now say with certainty that the economy is on the up … Slowly, slowly, what nobody believed could happen, will happen. We will extract the country from the crisis … and in the end that will be judged.”

Is ‘the economy on the up?’

Analysts have applauded Greece’s timing. Credit rating agencies and international creditors have noted some economic improvements over the last few months. Moody’s said earlier this month that economic growth and public finances on a more sustainable path and Standard and Poor’s revised Friday the country’s outlook to positive from stable.

“In our view, the timing is favorable from a macroeconomic and market perspective. First, funding / liquidity risks for the Treasury are contained after the disbursement of the €8.5 billion ($9.9 billion) tranche and the sizable primary surplus the government has run since 2015,” Antonio Garcia Pascual, chief European economist at Barclays, said in a note. He also said growth has resumed in the first quarter of this year and overall there’s stronger market appetite for Greek risk.

The timing could potentially benefit Athens as the European Central Bank may include Greek debt on its balance sheet under its stimulus program before the central bank announces plans to reduce quantitative easing.

Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, told CNBC that the timing is “anything but perfect.”

“Then there is the question of QE. The sale means that they are one step closer to being included in the ECB’s program, but the ECB is also one step closer to winding QE down. In that respect, the timing is anything but perfect.”

Will the ECB buy Greek debt?

At the moment, Greek government debt is rated as junk by rating agencies and cannot be bought by the ECB. According to the source familiar with the bond sale, it is too soon for the ECB to consider buying Greek bonds as it will need a new debt sustainability analysis before making a decision.

However, Vistesen warned that Athens is still being monitored by the European Union and the International Monetary Fund.

“The Greek return to the market is a big step for the economy and the Eurozone too, but it is also largely staged. Greece is still under strict administration by the EU and IMF, so it is not that they can just issue as much as they want,” Vistesen said.

Is this the ‘next terrible phase of Greece’s crisis?’

Former finance minister Yanis Varoufakis repeated comments about what’s still wrong in the country: “Why do I refuse to be impressed by the news of Greece’s return to the markets? It is because the Greek state and the Greek banks remain deeply insolvent. And, their return to the money markets is a harbinger of the next terrible phase of Greece’s crisis, rather than a cause for celebration”.

The EU’s commissioner for economic affairs, Pierre Moscovici, warned Tuesday that Greece needs to keep up its reform efforts, but he is confident that it will successfully conclude the bailout program.

The 86 billion euro financial rescue lasts until August 2018. Creditors are set to agree on debt relief measures before that so these are implemented once the program has come to an end.

Tuesday’s market return puts Greece on track for a “clean” conclusion of its third bailout, meaning without any additional funds from creditors.


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