Greek bond yields have reverted to below 1%

The return of the Greek benchmark 10-year bond yield to below 1 percentage point for the first time in six months, very close to the pre-pandemic all-time low, without doubt constitutes a vote of confidence in Greece from investors and a significant indication about the mid-term prospects of its economy.

Greece may be projected to post one of the eurozone’s biggest economic contractions in the second quarter of the year, as well as for the whole of 2020, but the market is showing that the shock the country is experiencing is temporary, pricing in the improvement in its outlook and its rapid recovery.

It is no coincidence that the entire yield curve, including the 5-year, 7-year and 15-year bonds, has reached historic lows, while on Wednesday Greece borrowed through treasury bills with a negative interest rate.

That is also partly thanks to the support from the European Central Bank, whose inclusion of Greece in its extraordinary bond-buying program (PEPP) has led to Greek yields plunging by 76%, from the high of 4.1 percentage points during the spring to 1 percentage point at Friday’s closing.