Greek bond yields dip even lower than US Treasuries

Greek bond yields dip even lower than US Treasuries

ft.com

Greece’s borrowing costs have tumbled to a record low — dipping below even the US — thanks to rising hopes of a renewed bond-buying programme from the European Central Bank and the centre-right New Democracy party’s sweeping victory in elections last weekend.

This marks a stark turnround for Athens, which underwent the world’s biggest government bankruptcy in 2012 and is still labouring with one of the largest debt burdens, at about 180 per cent of gross domestic product.

ECB president Mario Draghi has stirred expectations that the eurozone’s monetary authority is set to ease policy, hopes that were reinforced last week by the nomination of the IMF’s Christine Lagarde as his successor.

The country’s bond rally has been strengthened by the general election victory of the conservative New Democracy party, which will replace Alexis Tsipras’ leftwing Syriza. Although Mr Tsipras shed his reputation as a radical firebrand by grudgingly accepting the strictures of the EU-IMF bailout package, investors hope that ND will be able to reinvigorate Greece’s reform programme.

“There is now a large majority of parties in parliament in favour of a co-operative relationship with Athens’ international creditors and mostly pro-Europe,” Giada Giani, an analyst at Citigroup, said in a note. “This relationship remains the single most important factor for Greek debt sustainability and the country’s nascent recovery.”

On Monday Greece’s benchmark 10-year bond yield briefly touched 2.01 per cent, slightly lower than equivalent US Treasuries. The gap between the two had peaked at about 35 percentage points at the height of the Greek drama.