Bond Rally Feeds Greek Recovery

The Wall Street Journal

Greek bonds rallied further today on news late Tuesday that Fitch was upgrading the country from CCC to B-minus, pushing yields to their lowest levels in nearly three years and adding fresh impetus to the first steps of recovery. After highs of 36.58% in 2011, the 10 year yield fell to 8.15% Wednesday, according to Tradeweb.

The price of Greek bonds maturing in 2023 Wednesday rose to more than 65 cents to a euro, up from a nadir of around 15 cents to a euro last year.

Falling yields, rising prices, and of course the upgrade – are just the latest sign that Greece is becoming an attractive proposition for investors. Recent corporate bond issues have seen strong demand as investors on the hunt for yield grow more comfortable with the country’s prospects.

Among the investors seeking Greek assets are hedge funds and private banks, including York Capital Management, Dromeus Capital, LNG Capital and CQS. Third Point, run by Daniel Loeb, is starting a hedge fund focused on buying Greek assets, according to a report in The Wall Street Journal today.

It is a remarkable turnaround. Only a year ago, a debt restructuring had just wiped out more than €100 billion ($130 billion) in government bonds and the stock market stood at one-tenth its 2007 levels, while the country was poised for a chaotic election.

To be clear, the economy remains fragile and levels of unemployment are at record highs, especially among the younger age groups. That means gains are vulnerable to setbacks.