Markets show… the exit

Markets show… the exit

Ultimately, it turns out once again that the markets are at least one step ahead of the rating agencies. Although the upgrading of the Greek economy’s credit last Friday by Standard and Poor’s in step “B-” from “B” was conservative, and while retaining Greek bonds outside investment grade, markets gave “a vote of confidence” to the Greek economy.

As a result, the Greek bonds have broken all records today and the yields of two-year and five-year government bonds are compressed to an extent that is close to their historically low levels. This development also gives a signal that Greece is ready to issue the seven-year bond as planned by the Public Debt Management Agency, which will decide the most appropriate timing to proceed with the project. Forecasts and estimations in the market vary, with other analysts considering it may be a 24-hour issue (and others set the time limit no later than the first half of February). However, our country seems to be leaning towards the issuing of a 7-year bond option and with the aim of raising at least 2 billion euros.

The returns

As far as developments in the secondary market are concerned, the returns of both the 2-year and the 5-year Greek bond yields marked a spectacular course yesterday, with the result that they are nearing their historically low levels. The yield of the 2-year bond came below the 1.2% threshold, namely 1.170%, that is 151 basis points below its close two days ago, to 1.321%. The 5-year bond was down to 2.692% from 2.775% on the day before yesterday’s closure and was close to its historically low 12-year levels, slightly up before closing at 2,722%. In the autumn of 2006 it was below 2.7%, whereas in September of that same year at 2.66%. It is reminded that in the last 12 months, the performance of the same title got even at 7,185%, having surpassed 50% (50,5% in February 2012) in the previous years.

As for the 10-year bond, its yield declined again below 3.8% to 3,769%, close to 3,664%, the lowest level since the beginning of the Greek bond rally after the successful swap of the past year. This development was the result of both the upgrading of the Greek economy by Standard & Poor’s and yesterday’s positive outcome of the Eurogroup. The most optimistic detail, however, is that investors are gradually opening up long-term positions, which translates into a sign of confidence into the Greek economy…/IBNA