Greek bond yields are on the rise
The yield on the Greek 10-year bond has increased above 4% for the first time since last July, while the spread is moving to 138 basis points from 120 bps, where it was three months ago, despite the investment grade that Greek bonds have now regained.
According to analysts, the reasons for the pressures on bond prices are focused on two points, in addition to the mood prevailing in the market in general ahead of Thursday’s meeting of the ECB, where a new increase in interest rates is considered more likely than a few days ago.
First, it is the fact that the upgrade of Greece by Canadian agency DBRS Morningstar had been fully factored in, which caused a partial liquidation of positions in the framework of the “buy the rumor, sell the news” strategy. And, secondly, reports of fiscal costs from the country’s devastating floods and political developments have weighed on sentiment and cast doubts on whether Moody’s will make a bold move this Friday in its verdict on Greece.
Although Moody’s current rating, which places Greece at Ba3 with a positive outlook, is three notches away from investment grade – so it was not expected to reach the landmark rating – there were estimates that it could even perform a double upgrade, closing the gap with the rest of the rating agencies.
