Those who bet on the reduction of the Greek spread now justified

Those who bet on the reduction of the Greek spread now justified

The forecast for a narrowing of the spread of the 10-year Greek bond to as little as 250 basis points was reported by the London hedge fund and the rally in Greek bonds continued. The spread was currently in the region of 325 basis points, which means that Algebris Investments’ assessment of this fund is to further narrow the yield difference between the 10-year Greek bond and the German equivalent by 75 basis points or 0.75 of the percentage.

In the secondary government bond market, the 10-year Greek stock was, in the afternoon of Tuesday, January 9, at 3,674% with 3,664% down from 3,691% on the closing date and from 3,706% on yesterday’s opening, with the spread over the German 10-year yield (0.42% ) to 325.4 basis points. The Greek 10-year yield is at the lowest level since 2006 and about half a percentage point away from the historic lows of 2005.

The paradox

Wall Street Journal reported on the “paradox” of the Greek biennial yields that fall below the U.S., which means that Greek bonds involve less risk than the American bonds. It points out, however, that this development should make investors more cautious, as this move may prove excessive and premature. It is noted, that the performance of the Greek biennial fell to 1.47% from 1.52% yesterday and from 9% one year ago.

At the same time, the general stock index recorded a further rise of 0.50%, as it surpassed the level of 840 units, closing at 841.28, with the small cap stocks reaping the biggest gains, on average 2, 61%.

In the midst of these developments, the hedge fund Algebris Investments estimates, that investors who have bet on shrinking spread on Greek bonds seem to be righteous and while its managers believe that the momentum of the Greek economy will lead the country’s borrowing costs closer to German. As the spread shrank by 44 basis points in the month, Algebris estimates it can shrink this year to as much as 75 basis points, up to 250 points. It bases this provision on the fact that the government coalition to be formed in Germany, is expected to create greater cohesion in the eurozone and to increase German government spending, further backing Greece’s leverage…/IBNA