Greek 10-year bonds continue to generate significant investment capital flow, as the improvement of the climate in Greece, Europe?s likely agreement for an extension to the fiscal adjustment deadline and the course of the budget have generated some optimism regarding the country?s economy.
The 10-year bond maturing on February 24, 2023 — the nearest to mature — has recorded a rally of almost 100 percent since the lows reached in end-May, eating significantly into the spread with its equivalent German bund, used as benchmark.
From a level of 13.5 cents per euro before the June election, its price has nearly doubled to 26 cents per euro of nominal value. Its yield, meanwhile, has moved in the opposite direction to that of the price and has declined from 29.8 percent at the start of the summer to 20.8 percent last week. Spreads have therefore dropped below 1,900 basis points, shedding almost 1,000 b.p. These are bonds issued as part of the debt swap under the private sector involvement (PSI) and began trading in March.