Investors who bought Greece’s latest bond last week are already nursing paper losses.
The seven-year bond priced at a yield of 3.5 per cent on Thursday, but the €3bn paper is now trading at 4.19 per cent. Yields rise when prices fall.
The timing of the deal was hit by market turbulence last week, with Greece naming bookrunners on the Monday but, after markets shifted on Tuesday, it waited until Thursday to price.
The yield on Greece’s 10-year debt has also risen, up 80 basis points in the past week to 4.47 per cent.
To be fair to Greece, the uptick in its yields does not reflect a fundamental change of views in the market about its prospects. Rather it is simply the casualty of the sell-off in global sovereign bonds in recent days, in response to strengthening economic signals. Spain’s 10-year bond yield has risen 13 basis points in the past week, to 1.51 per cent, for example.
But with other countries’ yields also moving upwards, the risk premium investors pay for Greek debt is still low in historical terms. Greek 10-year yields are 374 basis points over the equivalent German bond, which is effectively the eurozone’s risk-free rate. The spread is around the same level seen in mid-December, before the recent market moves.
Greek bonds are less frequently traded than those of other eurozone sovereigns, meaning price movements can be more pronounced.
“Greece has underperformed [in the secondary market],” one sovereign deals banker said. “But it is really not that much when you recall that Greek debt has tightened by hundreds of basis points in the last year.”
In February 2017 Greek 10-year debt was yielding around 7.6 per cent.
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