Cap on Greek banks for bond buys may be lifted, says minister

Greek banks may soon be allowed to purchase more sovereign bonds issued by the country, its finance minister said on Thursday, a step which would boost demand and push country’s yields even lower.

Greek banks have had a cap on Greek sovereign holdings since 2015, following a sovereign debt crisis which forced the country into three bailouts totalling 288 billion euros ($312 billion) between 2010 and 2015, the largest in modern history.

“It appears that this month, or next month, there will be a lifting of the restrictions in the banking system on buying Greek bonds. This will reinforce the banking system with liquidity,” Finance Minister Christos Staikouras told Vouli TV, parliament’s television station, in an interview aired on Thursday night.

The decision should be taken by the ECB that supervises the country’s banks. At present Greek banks cannot hold more than 9.5 billion in Greek sovereign debt. Greece’s 10-year government bond yield fell below 1% for the first time on Wednesday. After a successful 15-year bond issue in January the country is planning two more bond issues.

Greek lenders now have 9.5 billion euros of Greek government bonds in their portfolios out of a total of about 50 billion euros in the free float. The rest 250 billion euros of its debt is held by its official lenders.

Such a decision will also help banks to invest their excess liquidity in bonds with higher returns than parked in ECB or other eurozone bonds with negative yields. 

[Reuters]