The rally in Greek bond prices that followed last week’s issue of a five-year note came to an end on Monday.
Analysts note that while the strong demand for the issue has led the government to start planning for its next market foray, the current favorable climate will be hard to sustain, as Greece remains “a special case.”
The yield of the 5-year bond maturing in April 2024 showed a marginal improvement on Monday to 3.29 percent, some 9 percent below the yield of 3.60 percent upon the note’s issue a week ago.
However, German lender DZ Bank warns that even though Greek spreads have fallen in recent days, the country risks are still there.
It points out that the new bond’s yield was similar to that of the seven-year paper maturing in February 2025, so demand was high, with the market follow-up being positive too.
This success is set to whet Greece’s appetite for more issues, the bank argues, while as far as the yield curve is concerned, it adds that a new 7-year bond maturing in 2026 could be the Finance Ministry’s top choice in the coming months.
On the other hand, and despite last week’s success, DZ Bank believes that the current performance of Greek bonds won’t continue: With a general election on the way, the Greek government is seen slowing the pace of reforms, while making pre-election concessions such as hiking the minimum wage by 11 percent to 650 euros per month.
As a result, the German lender expects Greek bond prices to head lower soon.
For its part, Societe Generale stresses that Greece has benefited from the favorable climate in international markets and the increase in risk willingness.
It adds that Greece is trying to imitate the success of Portugal, which after a successful bond issue managed to quell the fears of rating agencies, although it has already managed to lift its economy.
Greece constitutes a special case in credit terms, a riddle for the rating agencies, the French bank argues, as it has a very high per capita income, but also a higher debt compared to other countries with a B credit rating.
It is also the only one to have a cash buffer under the shield of the European Union, Societe Generale underscores.