Wednesday April 22, 2015 Search
Weather | Athens
14o C
09o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Greece’s bonds beat peers on route back to market

By Anchalee Worrachate

Greek and Portuguese government bonds beat their euro-region peers this quarter as the countries made progress toward returning to international credit markets.

The Hellenic Republic’s bonds returned 23 percent, the best performance among 34 sovereign debt markets tracked by Bloomberg World Bond Indexes. The European Commission predicts the Greek economy will grow in 2014 for the first time in seven years, and the nation is now looking to start selling debt again next month after achieving a budget surplus last year. Portugal’s bonds are the next-best earners, gaining 12 percent, as the country moves closer to exiting its bailout program.

“There’s no doubt the levels of debt in these two countries are still high and there are still challenges ahead,” said Richard McGuire, head of European rates strategy at Rabobank International in London. “But investors looking for higher yields are rewarding them for reforms they pushed through, which are beginning to bear fruits.”

Investors are returning to fixed-income, currency and derivatives markets as the sovereign-debt crisis that nearly broke the euro shows signs of fading. European Central Bank President Mario Draghi has pledged to backstop the region by buying the bonds of distressed nations if they request aid. Purchasing Greek bonds the day of Draghi’s comments on July 26, 2012, would have earned investors a 439 percent return, according to Bank of America Merrill Lynch Indexes.

The average yield to maturity on bonds from Greece, Portugal, Ireland, Italy, and Spain dropped to the euro-era low of 2.35 percent on March 27, the indexes show.

In contrast, Finland’s bonds have delivered the smallest gains this year among 14 euro nations tracked in Bloomberg World Bond Indexes, earning 2.6 percent. That’s 1.4 percentage points less than the region’s average.

Greece set off Europe’s debt crisis in 2009 when the government revealed its budget deficit had ballooned to more than five times the euro area’s permitted limit. It received two bailouts and has been shut out of bond markets since March 2010.

The country is in line for a rescue payment of 8.3 billion euros ($11.4 billion) under the second bailout program as soon as this week. Alternate Finance Minister Christos Staikouras said on March 18 that the government had achieved a 2013 budget surplus before interest payments of 2.9 billion euros, more than its prior forecast.

Standard & Poor’s this month maintained Greece’s credit rating at B-, six steps below investment grade, saying the country’s debt remains large even as its fiscal performance improves. Its ratio of debt to gross domestic product is forecast by the European Commission to be 177 percent this year, the highest in the European Union.

“Fundamentally, things are better now than they were a few years ago, but these are still high-risk peripheral products and people expect high returns from them,” said Padhraic Garvey, head of developed-market debt strategy at ING Bank NV in Amsterdam.

The rate on 10-year Greek bonds dropped to 6.63 percent as of 8:57 a.m. in London from a euro-era high of 44.21 percent in March 2012. The extra yield on the securities compared with benchmark German debt narrowed six basis points to 5.07 percentage points from a record 42.4 two years ago.

Greek government-bond trading on the electronic secondary securities market, or HDAT, increased by more than 270 percent in the first quarter compared with a year ago, data from the Bank of Greece showed. Turnover this year through March 24 was 981 million euros versus 267 million euros in the first three months of 2013, the central bank said on its website.

That said, Natixis Asset Management, which oversees the equivalent of about $405 billion, prefers Portuguese securities.

“We have a long position on Portuguese bonds but don’t own Greek bonds as we still see it as a default case,” Axel Botte, a Paris-based strategist at Natixis said in a telephone interview on March 28. “Portugal did a successful syndication in January and they are ahead of their schedule in terms of funding. It also ended last year with excess cash at the treasury level. We like the progress they’ve made.”

Portugal is scheduled to exit its international bailout program in May. A rally in its government bonds pushed 10-year yields down by 1.50 percentage points to 4.03 percent since the start of the year. While it’s held two sales of bonds via banks this year, Portugal has yet to arrange an auction as it waits for the market to stabilize at lower yields.

The nation is on track to restore full market access, Paul Thomsen, deputy director at the International Monetary Fund’s European department, said in Lisbon on March 12.

The Bank of Portugal revised its forecast for the economy on March 1, saying it will expand 1.2 percent this year after declining 1.4 percent last year. It had previously forecast growth of 0.8 percent.

“These countries have got themselves into a virtuous circle,” said Rabobank’s McGuire. “Falling yields incentivize Greek and Portuguese governments to attempt to finance themselves via the capital market and this adds further momentum to the bullish trend of their own bonds.”

[Bloomberg]

ekathimerini.com , Monday March 31, 2014 (11:59)  
Carrot to pay income tax all in one go
IOBE: No agreement would be a huge failure
Haircut on Greek banks’ collateral?
Uncertainty hits bookings from Germany and the UK
Greek PM eyes Merkel support
Prime Minister Alexis Tsipras is to meet with German Chancellor Angela Merkel Thursday in Brussels in a bid to secure a statement of political support from Berlin amid tough negotiations wit...
Mayors resist coalition´s demand to hand over cash reserves
Mayors insisted on Tuesday that they would not allow their municipalities’ cash reserves to be transferred to the Bank of Greece, as the government wants, at least until they have held a mee...
Inside News
BASKETBALL
Second win for the Reds over Barca in four days
Olympiakos is one step from the Euroleague Final Four in Madrid after downing Barcelona on Tuesday for the second time in four days, to edge ahead 2-1 in the best-of-five play-off series. Th...
BASKETBALL
Panathinaikos recovers to beat CSKA for 2-1
Three-pointer master Panathinaikos had the last laugh at the end of Game 3 of its series with CSKA Moscow on Monday winning 86-85 and reducing the Russians' lead to 2-1 in the best-of-five p...
Inside Sports
COMMENTARY
IMF needs to correct its big Greek bailout mistake
The Greek government's mounting financial woes are leading it to contemplate the unthinkable: defaulting on a loan from the International Monetary Fund. Instead of demanding repayment and fu...
COMMENTARY
Tragedy in the Mediterranean
Every time we in the West see yet another video of an atrocity committed by Islamic State or Boko Haram and express our abhorrence, and every time we are shocked to read of a boatload of mig...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Second win for the Reds over Barca in four days
2. Carrot to pay income tax all in one go
3. IOBE: No agreement would be a huge failure
4. Haircut on Greek banks’ collateral?
5. Uncertainty hits bookings from Germany and the UK
6. No leap in relations with Russia
more news
Today
This Week
1. Greek government's popularity takes a hit as talks drag on
2. Tragedy in the Mediterranean
3. No ferries on Labor Day as seamen take industrial action
4. Silence is not an option
5. Two men accused of migrant smuggling face prosecutor over deadly shipwreck
6. ECB studying curbs on Greek bank support
Today
This Week
1. Quarantine for Greek bank subsidiaries in neighboring countries
2. Time to get serious
3. Putting off payments led to Q1 budget primary surplus
4. Obama calls for flexibility in Greek reform talks in brief exchange with Varoufakis
5. Greece denies report that it is preparing for debt default
6. Greek government's popularity takes a hit as talks drag on
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.