Greece’s borrowing costs fall after inclusion in ECB’s package


Greek borrowing costs fell sharply on Thursday following the European Central Bank’s (ECB) decision to include Greek government bonds in an emergency assets purchases program.

The ECB triggered new bond purchases worth 750 billion euros ($816.90 billion) at an emergency meeting late on Wednesday to stop a pandemic-induced financial rout from shredding the euro zone’s economy.

The ECB’s purchases will include Greek government bonds for the first time. They had previously been excluded because of the country’s non-investment grade credit rating.

Greek 10-year yields, which had shot up nearly 300 bps over the last two weeks, were the clear outperformers in the euro zone government bond market, tumbling nearly 180 bps to 2.13 percent, and set for their best day since July 2015.

Greece’s finance minister said the decision made about 12 billion euros in Greek government debt eligible for inclusion, which was expected to help in lowering borrowing costs.

“This is a strong vote of confidence in the Greek economy by the ECB,” said Kostas Boukas, director of asset management at Beta Securities in Athens.

“The central bank decided to ignore its rule on the investment grade in order to normalize spreads between Greek and German bonds that reached 400 basis points on Wednesday,” he said.

The risk premium over German government bonds fell 170 bps to 230 bps.

Greece came precariously close to falling out of the euro zone in 2015 at the height of a debt crisis which required lenders throwing the country a financial lifeline on three occasions.

Its fiscal progress is being monitored by the euro zone and the IMF, which together lent Athens more than 250 billion euros ($272 billion) during its decade-long debt crisis.

The Greek economy will grow only slightly this year due to the impact of the coronavirus, by little over 0%, Staikouras told Greece’s ANT1 TV on Wednesday. The country had previously estimated economic growth of 2.8 percent this year.