Perception investors against Hellas changed drastically. And this is clearly seen in his work in the bond market. Greece managed to borrow cheaper than several eurozone countries, with Greek bonds are no longer the riskiest securities and approach in terms of returns the countries considered the “core” of the euro – and all this, despite the most rapid tightening of monetary policy by the European Central Bank in its history. Capital administrator characterize Greek bonds as a “little miracle” in the eurozone market, pointing to “K” that it is clear that “Greece is in … fashion” thanks to political stability, strong economic performance and the prospect of regaining the investment rating lost 13 years ago.

spread of Greek 10-year bonds against Germany fell to 122 basis points and the lowest level since October 2021, with the rally picking up after the first round of the election and continuing into the last week. In fact, Greek bonds recorded the biggest improvement in the eurozone since last July, when the ECB began raising interest rates, with the spread falling by more than 100 basis points. The spread against Italy is moving steadily into negative territory, with Greek bonds trading at around 55bp. lower than Italy’s, while the spread against Spain fell to a multi-year low and Greek 10-year bonds yielded 3.63% on Friday, down 23bps. higher than 3.4% of Spanish.

The Greek state is now borrowing cheaper in countries such as Cyprus, Malta, Croatia, Latvia, Slovakia, Slovenia and Lithuania – all investment grade countries if we look at the eurozone region – although the comparison is not equal due to different currencies and conditions. it takes (much) cheaper than the US and UK.

As “K” notes, Greece borrows cheaper than even the Commission at durations of 2-3 years, and on a 10-year duration – by only 60 bp. higher. Of course, this is more of a “technical” issue, as EU investors do not view it as a “sovereign creditor”, which is why it launched a survey of international investors last week to identify ways to increase trade, liquidity and the attractiveness of its bonds. It is important that, despite the triple “A” assigned by the EU rating agencies, its bonds are not included in international bond indices.

The explanation for the superiority of Greek bonds is very simple. analysts and public debt managers point to “K”.. One reason is the fundamentals of the economy and its prospects, and the other is the small size of the Greek market and the fact that Greek bonds are inherently “hard to come by”.

The Greek state now borrows cheaper than countries such as Cyprus, Malta and Croatia, which have an investment grade.

“The impressive rise in Greek bonds is a combination of a positive macroeconomic environment (including election results and better financial prospects) and a lack of liquidity,” notes in “K” Antoine Bouvet, chief analyst at ING. “Greek free float bonds make up a small portion of government debt and represent a smaller market than most in the euro area. This means that when (as it is now) the macroeconomic environment improves, the market is unable to meet the additional demand,” he explains.

At the same time, the market is betting on investment grade, causing many investment banks to buy Greek bonds to make them available to their clients when the milestone is reached.

Although it needs more than an investment grade rating for Greece to join international bond indices, it is believed that, as happened with Portugal in September 2017, there will be a significant inflow with the first upgrade. This, according to investment houses, is expected in September from DBRS or at the latest in October from S&P. A few days ago, JP Morgan calculated that even during 2023, Greece will manage to achieve an investment rating of three houses, which means that before the end of the year it will be in the group of “investable” countries, attracting a wider audience of investors. with a long-term horizon and qualitative characteristics.

“Upgrading to investment grade will bring a lot of passive buying from funds investing in major international bond indices, which will move in the region of 16-18 billion euros,” points to “K” French bank manager who also trades Greek bonds. Given that there are only 74 billion euros of Greek bonds in circulation, of which 35 billion euros are held by the ECB, this is certainly a significant amount.

Market participants point to “K” that the perception of Greece has changed significantly, the country has become the center of attention and admiration. What makes Greece stand out, they explain, is political stability. Thus, a government with a strong majority is a passport to investment class, as it automatically means that the country will meet its financial and reform commitments. “The only obstacle to the upgrade of Greece’s rating is political uncertainty. If there is a policy change that leads to a pause in structural reforms and the flow of funds to the Development Fund, the downward trend in the debt-to-GDP ratio in 2023-2025 may not materialize,” notes Société Générale. It is worth noting that, according to the Greek Stability Program, the debt-to-GDP ratio will decrease to 135.2% by 2026, which is lower than Italy’s debt ratio (140.4%).