Declining Greek Sovereign Bond Yields

CEIC Macro Watch #31 - April 30, 2014 - In April 2014, Greece returned to the bond markets with an over-subscribed issuance of 5-year bonds. This comes in the wake of the downward trend of required returns on government debt in the secondary market. On 28 February 2014 the yield on the 10-year Greek government bond fell below 7% - a critical threshold for sovereign debt payments sustainability, and restored some investor confidence in Greek bonds. One explanation for the renewed interest in Greek sovereign debt centers on the perceived success of the structural reforms forced on the country by its international creditors. This is demonstrated by the improvements in the government fiscal deficit (from -13% of GDP in 2010 to -3% in 2013), and the current account deficit (from 20% of GDP in the fourth quarter of 2007 to only about 3% as of the end of 2013). The idea that the main driver of the plummeting yields is the low external interest rate environment, underpinned more recently by expectations of an imminent quantitative easing programme by the European Central Bank, also gained traction. In the beginning of April 2014, the spread between the 10-year Greek sovereign bond and the 10-year German bund fell below 5% - its lowest level since May 2010. Currently, the consensus seems to be that the sovereign debt of the troubled country, at its current yield levels, provides reasonable investment opportunities for bond investors faced with near-zero real returns on governments securities in the developed markets and uncertainties unfolding in the emerging market economies. By Stoyan Kiryazov - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
1st May 2014 Declining Greek Sovereign Bond Yields

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