Despite recent positive developments, Greek bonds are still unable to attract the attention of investors, who remain reserved after the unrest recorded last month.
The bad timing is one of the reasons for the market’s lack of reaction to the Eurogroup decision and the credit rating upgrade by Standard & Poor’s, as the international environment has deteriorated and investors are avoiding any risks due to concerns over immigration and the political landscape in Germany, the persisting problems in Italy and the new trade standoff.
All this highlights just how vulnerable to external developments Greece is, with the recent report by the Fiscal Council highlighting that Greek bonds remain highly sensitive to external factors because of the high national debt.
The yield on the Greek benchmark 10-year bond dropped 0.7 percent to 4.069 percentage points on Wednesday, while the yield on five-year paper rose 0.7 percent to 3.281 percentage points.
In a report HSBC noted that the absence of the so-called French mechanism from the Eurogroup decision, which would have associated the debt relief measures with the growth rate, is one reason for markets’ reserved response, as that mechanism would have provided them with guarantees.