Saturday, April 12, 2014

Five Explanations for Greece's Bond Yield

This article explains superbly the reasons for the success of the latest Greek bond issue. Five reasons are given and the conclusion is:

"None of these reasons, individually or collectively, are particularly good reasons to buy Greek bonds at 4.95%. It has always been very easy to lose a lot of money buying junk-rated sovereign debt at low single-digit yields; that hasn’t changed. But if you’re a bond investor, there’s a surprisingly large number of ways that you could end up making money after buying Greek debt at these yields. Which in turn explains why Greece found it so easy to sell €3 billion in bonds".


  1. This is moral hazard in its purest form. The Greek administration doesn't bother whether the borrowing rate is 5%, 10% or 25%, they know it will be the eurozone that will pay the liability in the end, so they think let's tap as much as they can. The party of the Greek elite and Greek oligarchs can go on, and on and on. And still the Greek people in it's majority doesn't seem to want to chase them away and to accept that Greece has no chance to to survive with an (undervalued) German currency.

  2. Imho this all is part of the banking casino show.

  3. bonds of a bankrupt state, ECB guarantees, taxpayers pay....