The Greek government bond yield curve returned to an uphill shape on Tuesday, as investors continued to price out default risks after last week’s sovereign ratings upgrade by Fitch.
The difference between Greece’s 30- and 10-year yields turned positive to last trade at 3 basis points, with the curve disinverting again for the first time in about three years.
When short-term yields trade higher than longer-term yields the market is pricing in increased near-term default risks. Just before Greece’s debt restructuring in March 2012, 10-year yields were 15 full percentage points higher than their 30-year counterparts. [Reuters]