Investors ditch Greek bonds

The flight of capital from Greek government bonds has grown to such an extent that the bonds spread with German Bunds exceeded 170 basis points in the past week. Last Friday, that spread, concerning benchmark 10-year bonds, reached 172 basis points. «Flight toward quality» is how foreign banks’ senior officials described to Kathimerini the departure of capital from Greek bonds to those of other European states. German Bunds are being considered a «safe haven» during the crisis. The broadening of the spread is further burdening the cost of borrowing by the Greek state and could therefore affect Greece’s credit rating, argues Moritz Kraemer, head of the valuation section of Standard & Poor’s for European countries. Recently Fitch downgraded the prospects of the Greek economy’s credit valuation. The same analysts stress that the swing toward German Bunds may be intended to avoid risk in a period of instability on stock markets, although this is only one side of the coin. The other side is that international investors have once again become wary of Greek bonds. As the crisis rages on, they prefer to avoid the increased risk that Greece’s huge current account deficit has revealed, in addition to the country’s high public debt, fiscal problems and the additional burden for the economy from the government’s 28-billion-euro guarantee for banks. Foreign funding will become even harder to attract, analysts believe, as, over the course of a period with a global drop in loan exposure, known as deleveraging, one of the first indicators investors monitor in revising their investment strategy is the current account deficit.