Greek bonds in negative yield territory

Greece joined the elite of countries with negative interest rates on their bonds on Friday, as for the first time in history the yield of a Greek bond dropped below zero. It is the three-year debt expiring in January 2023 that saw its yield slide to -0.02%, following the rally that the entire Greek yield curve has recorded in the last few days due to the general trend toward bonds supported by the European Central Bank.

The yields on Greek treasury bills have long been in negative territory, with the state being able to borrow cost-free through them, boosting the country’s cash availability as lenders now pay Greece to have the privilege of lending it money.

Analysts had forecast it was only a matter of time before short-term Greek bonds also passed that milestone too, as investors seek refuge in state bonds with the pandemic forcing national economies to shut down.

All signs point to a further improvement for Greek yields, with the ECB being the main reason for that: The promise by its chief, Christine Lagarde, that Frankfurt will proceed with further interventions next month, which the market translates into an increase in the size and duration of the emergency bond-buying program (PEPP), means that the safety net and therefore the attractiveness of Greek bonds will grow further.

The yield on Greece’s five-year paper was also near zero on Friday, at +0.06%, after diving 83% in just 10 days. The yield on the benchmark 10-year bond reached a historic low, at 0.79%, likewise the seven-year bond was at 0.45%, while the 15-year paper has recorded an impressive course since its reissue last month at a rate of 1.15%, falling 1% on Friday.

The main objective of the Public Debt Management Agency is for the Greek yield curve to obtain healthy steepness, making the most of the favorable climate.

After its shrewd management in the last year, PDMA is likely going to take further steps to improve the shorter section of the curve, which means it is possible we will soon see a new market foray with the reissue of last April’s seven-year bond, while the issue of a new bond, for example a five-year note, should not be ruled out either.