Greek yields decline to historic lows

Greek sovereign bond yields posted a rapid decline on Wednesday despite the mild trend observed on other eurozone markets, a day after the strong rally on statements by European Central Bank chief Mario Draghi. This illustrates that investor sentiment toward Greek assets has changed, as they attract an increasing number of foreign portfolios.

Since the May 26 elections for Euro MPs and local and regional authorities, Greek yields have been recording fresh lows on a near-daily basis, after last month’s rebound that followed the announcement of government handouts. This has brought the spread between the Greek 10-year bond and the German bund to the lowest level since March 2010, i.e. before Greece entered the bailout mechanism.

The yield on 10-year bonds dropped to 2.49 percentage points, down 3 percent from Tuesday, while that on the five-year note dropped 5 percent to another historic low of 1.304 percentage points.

Analysts attribute this rally to both domestic and external factors: The market takes for granted that there will be a political shift in the country with the advent of a strong pro-investment government, while it also expects new bond issues.