JPMorgan says Greek bond pessimism is overdone

JPMorgan Chase & Co is challenging the consensus view on the first quarter’s worst-performing developed-nation sovereign bonds.

While Greece is locked in negotiations over its funding, the market is overly pessimistic on the nation’s debt and long-term investors should buy its 30-year securities, according to Aditya Chordia and Nikolaos Panigirtzoglou, rates strategists at JPMorgan in London.

“We see a wide range of potential scenarios for the second quarter of the year,” Chordia wrote in an e-mailed report dated April 1.

“Our inclination is that the more conciliatory tone among the parties involved is correct, and Greece will present and approve a set of reforms that will unlock further funding. The potential upside on the trade is significant, but so is the downside and volatility.”

Greek government debt lost 9.4 percent in the first three months of the year, the biggest drop among markets tracked by Bloomberg World Bond Indexes.

The securities tumbled after the election of a SYRIZA-led government created a standoff over the terms of the 240-billion-euro rescue provided to Europe’s most indebted state.

Greece’s benchmark 30-year bonds fell for a third day, pushing the price down 0.34, or 3.40 euros per 1,000-euro face amount, on Wednesday.


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