Greece Returns To Debt Markets After Moody’s Upgrade

Greek Bond Sale Gains Backing from Investors

The country’s first bond sale since Europe’s debt crisis raised €2.5 billion last week. Order books reached a ceiling of €11.8 billion.

Investors began snapping up 10-year Greek debt at a 3.9 percent yield. This came after Moody’s, a credit risk rating agency, lifted the country’s rating scale from B3 to B1 earlier in the month. Such progress reduces the likelihood of credit risks around fixed-income obligations. Nevertheless, the credit rating remains classified as speculative.

Sovereign Debt Demand Sends Greek Yields to 13-Year Low

10-year yields dropped to 3.6 percent on the session, a low not seen since early 2006. Major Greek banks were up for the day as well, with Greece’s index outperforming Europe’s wider stock index. Moody’s endorsement somewhat verifies that the country’s reform programme has started bearing fruit.

The sale was the country’s first since it was shut out of international capital markets and was forced to seek the first of its three bailouts.

Central Banks U-Turn a Cornerstone?

Greece has ventured into the international capital markets again after the country’s weak attempt to exit the European Union back in 2015. The country has now ventured into capital markets once in 2017, once in 2018 and twice in 2019.

Both attempts prior to 2019 raised €3bn each at a lower yield of 3.6 percent despite the maturity of the bond itself being lower. The late January 2019 sale “drew over €10 billion in demand”.

Meanwhile, the country only emerged from a €86 billion punishing bailout in August last year. The sale is the first post-bailout debt sale.

With Moody’s upgrade and the market’s appetite for higher-yielding longer-dated bonds, Greek markets are starting to thrive. Besides the urge for greater returns, interest rates are unlikely to see the light of day any time soon. This is at least true in Europe, since Mario Draghi pushed the hiking cycle back to 2020. And investors have now limited options with one being high-yielding bond purchases.

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