HomeFinance NewsBets towards Greek bonds hit highest stage since 2014

Bets towards Greek bonds hit highest stage since 2014

Hedge funds have been upping their bets towards Greece’s authorities debt because the nation heads to the polls this weekend, as they grow to be involved about the potential of political paralysis after the election.

The full worth of Greece’s bonds borrowed by traders to wager on a fall in costs — referred to as shorting — hit its highest stage since 2014 this week at over $500mn, in line with knowledge from S&P International Market Intelligence — up from round $65mn at first of the 12 months.

Greek debt has carried out higher than that of different European nations to this point this 12 months, and final month S&P modified its outlook for the nation from steady to constructive, placing it on the cusp of regaining the funding grade ranking it misplaced in 2010.

“Greek authorities bonds have outperformed their Eurozone friends for some time so the construct in shorts goes towards the prevailing [bullish] narrative in Greece,” mentioned Antoine Bouvet, head of European charges technique at ING.

“To this point the prospect of the election has not slowed the efficiency of bonds however we’ll should see after the outcomes.” 

The hole or — unfold — between the yields of Greece and Germany’s 10-year debt — a key gauge of traders’ threat evaluation — has narrowed from greater than 2.8 proportion factors final October to round 1.5 proportion factors this month.

The benchmark Greek 10-year bond is buying and selling at a yield of 4.04 per cent, decrease than the 4.3 per cent yield for Italy, which has funding grade standing. Yields fall when costs rise.

Richard McGuire, head of charges technique at Rabobank, famous that there has solely been one earlier event prior to now decade when this unfold has been adverse; that was final summer time, when the inversion was shortlived.

“I can see why quick cash traders can be positioning themselves for the potential of the same reversal,” he mentioned, including that if the ruling get together is unable to kind a authorities after the primary spherical of voting, that might convey uncertainty for markets.

Regardless of the sharp enhance in shorting volumes, traders observe that the general scale remains to be a really small proportion of complete Greek debt, which stands at round €400bn. Most of that is held by official our bodies relatively than traders.

Through the Greek debt disaster a decade in the past, brief positions towards the nation’s bonds peaked at greater than $15bn. 

After spending years as Europe’s drawback youngster, Greece’s financial efficiency is now robust, with gross home product increasing 5.9 per cent final 12 months. Authorities debt as a proportion of GDP hit 206 per cent throughout the pandemic however was all the way down to 171 per cent final 12 months.

Professor Costas Milas, a professor of finance on the College of Liverpool, mentioned hedge funds could also be upping wagers towards Greek debt owing to “nervousness and second ideas” forward of the election however given yields are decrease than Italian debt, “traders should not panicking immediately”.

Supply hyperlink

latest articles

explore more


Please enter your comment!
Please enter your name here