2014: a year in data – Greece
Turning point to point of no return?
Greece’s return to the capital markets in April this year was celebrated as a turning point in the battered country’s fortunes. The 5-year, euro denominated bond was met with strong demand by investors. Yet economists were entirely unconvinced that Greece’s fundamentals had improved, and continue to rate Greece by far the riskiest issuer among the eurozone periphery. Sure enough, as the year drew to a close Greek bond yields soared once again while elsewhere in Europe many issuers saw their borrowing costs fall to all-time lows. The announcement of a snap election in December did not help.
The country seems to be turning a corner: there are hopes its economy might return to growth this year. Local banks think they’re in good shape for the European Banking Authority tests and that there might even be opportunities in non-performing loans.
In April, Greece attracted €20 billion of orders for a €3 billion five-year issue offering 4.95%. Such an outcome would have been unthinkable a year ago and is only the most extreme example of the near-perfect funding conditions now enjoyed by many peripheral sovereign borrowers that were locked out of the market until recently.
Although Greece has returned to the bond markets for the first time in more than four years, its risk-score remains very low, anchoring the bankrupt sovereign to the lowest of ECR’s categories containing the world’s highest-risk sovereigns.