Bonds Yields Decline in the Eurozone – Greek 10-Year Below 3%

Greek 10-year bonds dropped below 3% to 2.93%, bringing the spread to just a breath away from 100 basis points.

The decline was in line with the trajectory of the Eurozone bond yields in recent months, as they have also experienced a notable decline, reflecting investor sentiment and expectations of a sharp reduction in interest rates next year.

The benchmark German 10-year bond, a reference point for the Eurozone, also saw a decline of 4 basis points to 1.931%, reaching its lowest level since March of the previous year.

Analysts attribute these developments to anticipated inflation decreases in the U.S. and Europe, coupled with a change in tone from central banks, resulting in a sudden drop in borrowing costs.

Looking at Greece’s debt situation, the Public Debt Management Agency outlines the country’s borrowing needs for 2024, totaling €18.9 billion. Of this, €10 billion will come from bond issuances, €4.1 billion from various sources such as the European Investment Bank and the NextGenerationEU fund, €1.6 billion from equity and asset sales, and €3.6 billion from available liquid assets, with a liquidity cushion estimated at €30 billion.

Analyzing the outgoing year, the Public Debt Management Agency notes a significant decline in Greek bond yields throughout the year, along with an outperformance relative to other Eurozone countries.

Specifically, the spread of the Greek 10-year bond against the German equivalent hit a 26-month low, standing at 115 basis points in mid-December 2023.

Regarding the sustainability of public debt, the agency emphasizes that Greece benefits from a favorable debt structure, with over 70% of the debt held by official sector creditors (EU member states and intergovernmental entities). Additionally, the debt exhibits a long maturity profile and low interest rates, as 100% of it carries a fixed interest rate, mitigating interest rate risks.

Source: tovima.com