The 1-year bond yield was set at 3.75% in an auction held this week public debt management organization, compared to 2.79%, which was the yield at the corresponding auction in December last year, while in the recent past, about a year ago, the Greek interest yield fluctuated at a negative level. The first impression is that Hellas takes expensive only for one year when the yield Greek 10 years, for example, just 65 basis points higher at 4.4%. The real and broader picture, especially for the eurozone as a whole, is however different and reflects very different conditions prevailing in the bond markets now than they did a year or two ago. First of all, it is worth noting that the 3.75% yield is 10 basis points below the interbank rate (3.85% on Wednesday) and also 20 basis points below the EUR annual interest rate swap of 3.95%. It is also not far, only 40bp, from Germany’s annual bond rate of 3.37%, and very close to the corresponding Italian bond rate of 3.64%.

The second point is that participation of foreign investors in this auction has reached 61%, while usually 12-month interest rates do not rise above 30%-40%, while Greek banks absorb most of the issues. This strong demand reflects the fact that Greece is considered a “safe bet” due to its high cash reserves, and the fact that it has overcompensated interest rate risk for the next 4-5 years with portfolio management strategies. past years from the guide.

Third, the large and rapid growth in short-term bond yields is a global phenomenon and reflects market expectations for interest rates and monetary policy. On Thursday, for example, the yield on German 2-year bonds, considered the most sensitive to European Central Bank interest rates, hit 3.385%, the highest since the 2008 global financial crisis. 2-year Italian bonds stood at 3.87% and reached the highest level since the eurozone debt crisis in 2012.

Increasing interest rates

The market is looking for higher interest rates and currently estimates that the ECB’s final interest rate will be above 4% this year, while it expects a 50 basis point hike next week. and gives an approximately 90% chance of further growth by 50 bp. at the next meeting in May. French central banker François Villeroy de Gallo said on Thursday that euro zone inflation remains very high and remains a top monetary policy priority. A few days ago, Christine Lagarde also hinted that further interest rate hikes after March were highly likely, while Austrian central banker Robert Holzmann advocated four consecutive 50 basis point ECB rate hikes, setting the final rate at 4.5%.