Greek bonds make big gains on QE hopes

Gains in the region of 60 percent have been observed in Greek sovereign bonds since June lows, attracting buyers who are betting that the European Central Bank will include them in its quantitative easing (QE) program.

So far the ECB could not purchase additional Greek bonds because of the lack of a financial program and due to the ceiling for Greek bond purchases having been reached. Once Greece pays the ECB-held bond that matures tomorrow, the Central Bank will be able to purchase new Greek bonds.

The price of the three-year Greek government bond issued in July 2014 and maturing in July 2017 increased 60 percent between June 29 and August 17 this year.

The Greek government five-year bond, which returned to markets on April 14 last year, went from a low of 57 cents per euro of face value to a new high of 84.5 cents per euro on August 17, a 48 percent increase.  

The Greek government bond maturing in 2025 has made price gains close to 70 percent.

The ECB can buy one-third of eligible government bonds of each country’s stock as part of a QE program. This amounts to nearly 16 billion euros for Greece, subject to the reliable execution of the current bailout program.

After the ECB, German insurance group Allianz is the second-largest investor in Greek bonds, increasing its holding via Pimco Investment Management this year to 1.2 billion euros.