Greece Prepares To Fly Solo On Bond Markets

LONDON, July 18 (Reuters) – After the outcast of European bond markets, Greece shows up firmly on the road to redemption. 100 billion) bailout in August will mark the end of an era in which Greece defaulted, 10-year yields topped 40 percent and the country came close to being kicked out of the euro perilously. Now, as Greece follows fellow financial meltdown victims Ireland, Spain, Portugal, and Cyprus into the fold back, it requires to lure long-term investors into its bond market so the country can fund itself independently once the bailout cash runs out.

That could happen with a new bond concern to tap into positive sentiment around the finish of the country’s third bailout, inclusion in European Central Bank relationship buys or further credit enhancements for its debt which continues to be rated rubbish. Nick Gartside, international chief investment officer for fixed income at J.P.

1.7 trillion of property. A substantial milestone would be for the European Central Bank or investment company (ECB) to add Greek bonds in its substantial quantitative easing (QE) stimulus schemes once the bailout ends. As Greece is scored below investment quality, it has only had access to cheap central bank or investment company cash because it is part of a bailout program. The ECB has made clear that once Greece leaves the program its waiver will be revoked.

To be contained in QE, Greece would need to pass an ECB debt sustainability analysis, which is unlikely to happen until the country has applied reforms decided in June with Eurogroup lenders to ease its debt profile. At almost 180 percent, Greece has the highest percentage of debts to gross local product in the euro area.

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Analysts at HSBC, however, mentioned that Greece was considered a special case by euro zone authorities, implying there may be some leniency on the conditions it needs to be eligible for QE. Barclays economist Francois Cabau. He quotes the ECB could buy about 3 billion euros of Greek debts before striking the limit on how a lot of the country’s debt it can purchase. Having received 260 billion euros in school funding since 2010, Greece’s leave from the bailout program will be momentous for the euro zone too. Some long-term investors, such as J.P.

Morgan’s Gartside say, the positive sentiment means they would “definitely” buy a fresh Greek bond, a departure from the situation now where most private sector bondholders are hedge money or domestic banks. The improving picture helped Greek bonds come back more than 40 percent last year in dollar conditions and they have performed strongly in 2018 too.