: Negative bond yields in Greece show incredible turnaround

: Negative bond yields in Greece show incredible turnaround

9 Nov    Finance News

A pedestrian wears a mask as she walks past EU, Greek and Byzantium flags in central Athens on November 3, 2020.

louisa gouliamaki/Agence France-Presse/Getty Images

Investors now pay Greece for the privilege of owning its debt, an incredible turnaround from its securities being the source of global financial instability a decade ago.

Greece’s three-year debt turned negative on Friday, and then the country received more good news after the surprise decision by Moody’s Investors Service on Friday night to upgrade the nation’s debt. The upgrade, from Ba3 from B1 previously, still leaves Greek debt in junk market territory, and three notches away from becoming investment grade.

The yield on Greek 10-year debt TMBMKGR-10Y, 0.869% fell 4 basis points to 0.77%. In 2012, the yield on Greek 10-year debt surpassed 35%.

At the height of the European crisis, investors fretted that the euro might break apart. Bailouts from the International Monetary Fund and the European Union kept Greece in the eurozone and the shared currency intact.

Moody’s said reforms have brought “tangible progress in areas including tax administration and compliance and the fight against corruption.” Moody’s also said the country’s growth prospects are positive, even with the pandemic’s impact on the important tourism sector.

“Greece’s economy will benefit from ongoing efforts to improve the investment climate coupled with inflows of very substantial European recovery funds. Favorable growth prospects, combined with a return to a prudent fiscal stance, will lead to a gradual reversal in the public debt trend,” said Moody’s.

Greece, Moody’s pointed out, stands to receive €32 billion from the EU’s new recovery fund, with 60% coming in grants.

Another plus for Greece — interest payments as a proportion of government revenue are projected to be 6.2% next year, lower than the 10.9% of its peers with Ba ratings.

The broader picture is that Greece has benefited from the European Central Bank buying Greek debt, as well as the planned EU recovery fund. The ECB’s pandemic emergency purchase program has bought close to €13 billion in Greek securities.

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