Greek bond euphoria turns out to be very short-lived

The party for Greek bonds lasted just one working day, as the euphoria set off by the Eurogroup decision on the debt relief last Friday gave way on Monday to more subdued sentiment.

The deterioration of the international climate combined with a second reading of the agreement lead to the realization that Greece’s road out of the bailout program will be far from smooth and that the country remains vulnerable to turbulence.

The new sell-off in Italian bonds, concerns about the migration problem and strengthening fears of a trade war resulted in fresh turbulence on the markets that may not have upset the Greek assets but did keep investors away, contrary to the originally favorable atmosphere.

The yield of the Greek benchmark bond ended up at 4.136 percentage points on Monday, down just 0.36 percent from Friday’s closing, while the yield of the five-year debt climbed 0.64 percent to 3.316 percentage points.

Gabriel Sterne of Oxford Economics told Kathimerini that although the agreement is slightly better than expected, the fiscal adjustment required of Greece is excessive after the collapse of its gross domestic product, and the risks regarding implementation and the political environment remain.