Bad news for the European economy, reflected in lower PMI indexes, was good news for bonds, especially Greece’s, whose yields dropped significantly on Wednesday, as it appears increasingly likely that the European Central Bank will pause its rate hike in September.
The yield in Greece’s 10-year treasuries dropped 5% to 3.81%, while its spread from Germany’s 10-years was limited to 127 basis points (1.27%), the lowest since October 2021.
Greek yields are just 25 basis point higher than Spain’s and 40 basis points lower than Italy’s; the latter spread could reach 50 points as the main ratings agencies inch closer to upgrading Greek debt to investment grade after 13 years, a JPMorgan report said Wednesday.
The US bank believes that DBRS will upgrade Greece’s rating on September 8, followed by S&P and Fitch on October 20 and December 1, respectively.
