Greece’s bonds trade as if investment grade already achieved

Greece’s bonds trade as if investment grade already achieved

Greek bonds are already trading as though the country has regained investment grade, bank analysts that deal with Greek government debt told Reuters on Friday, with the news agency reporting that investors consider Greece’s return to investment-grade credit ratings “a done deal.”

“Investors are hopeful that the New Democracy party – the clear winner in Sunday’s election though it fell short of an outright majority – will stay in power after a repeat vote in June and continue reforms, paving the way for Greece to reclaim the ratings,” Reuters said.

According to analysts, “after this week’s sharp drop in borrowing costs, the bonds were already trading like investment-grade paper,” while Reuters notes that Greek 10-year bond yields around 3.9% “are now trading about 50 bps below Italy’s,” which “has investment-grade credit ratings from three big ratings agencies.”

“Greek 10-year bond yields have fallen nearly 15 basis points following Sunday’s election result. The additional yield or spread Greek bonds pay over safe-haven Germany – which reflects their risk premium – is at its lowest since 2021,” Reuters reported.

It also noted that “since its bailout program ended in 2018, Greece has regained market access, wrestled down its record public debt and growth is set to continue outpacing the European Union average this year and next. A return to the much-coveted investment grade would be more than symbolic for the country. It would make Greek debt eligible for government bond indexes, attracting steady demand from a much bigger pool of global investors,” it said.

Analysts also noted, however, that the upgrade – which could come as early as October from S&P Global Ratings – is “already in the price” and will not lead to a sharp reduction in Greek bond yield spreads relative to German bonds.

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