Greek five-year government bond yields hit record lows on Wednesday and benchmark German yields fell below -0.45% for the first time since February as euro area bonds remained supported ahead of the conclusion of the US Federal Reserve’s meeting.
The world’s most important central bank is expected to keep the stimulus taps open. Greece’s strong performance comes at a time when most southern European debt has benefited from the cautious stance taken by the European Central Bank in recent meetings and a shift in policy targets that have dovish implications.
“Greek five-year yields hitting an all-time low is directly related to the ECB quantitative easing program, specifically the PEPP program,” Investec economist Philip Shaw said.
He was referring to the central bank’s pandemic emergency purchasing program (PEPP) launched last year in response to the Covid-19 crisis that included junk-rated Greek government bonds for the first time since the ECB started asset purchases in 2015. Inclusion in PEPP has meant that the ECB has purchased a significant share of the free-float in Greek bonds.
Greece’s benchmark 10-year sovereign bond yield dropped a basis point to a seven-month low of 0.61%, while its five-year bond yield dropped further into negative territory to hit a new record low of -0.145%. [Reuters]