Investing in Greek government bonds | Too many risks or opportunities to be seized?
Two months ago, an interesting article in the business section of CNN called Greek bonds as the hidden gem of Europe, which is an excellent investment opportunity at this stage of financial history. In 2013, during the so called Sirtaki bonds there were generated higher returns than 33% if you include the coupon rate and the increase in their prices on the market. According to many analysts, even 2014 should be a good year. After five consecutive years of recession, the macroeconomic situation of Greece is improving with a probable stabilization of GDP. In practice, the Greek government bonds are currently similar to those of emerging markets but with better prospects for the future than the past.
If we study the trends in the spread between Greek bonds and German bonds for two years or so, you will discover a truly remarkable narrowing of the gap. The difference is that in January of 2012 they stood at 2,800 basis points but at this time they are around the 690 and could fall further. Of course, the risk factors remain. The debt of the country is still very high (170% of GDP), but three quarters of it due to international institutions is guaranteed a certain stability.
Debt restructuring decided in 2012 which at the time led to a reduction in the coupons of bonds with maturities of 10 and 15 years to a meager 2% probably will not see a repeat in the immediate future because it is going down the need for Treasury financing. If it will, the yields on ten-year bonds are intended to fall again at least at certain times followed by another slight ascent.
Many analysts , such as those of Morgan Stanley, consider the Greek bonds to still be volatile, but basically out of danger – at least in the short and medium term. What do you think of them? Retail investors may also be groped in full awareness of the high risk for diversification of a small portion of their portfolio in the direction of Greeks, especially because the investment is possible even for very low figures as a few thousand Euros.