When the yields for Greek sovereigns come crashing down - close to 1.3% for 10-year bonds, almost 0.7% for 5-years - there is some market agitation, notwithstanding the fact that such market for Greek debt remains quite shallow. Not to forget that the most recent issue of benchmark-sounding Greek paper - in March 2019, almost ten years after the last 10-year was issued and Greece was effectively shut out of the markets - went for 3.9%, while the 5-year of January 2019 was at 3.6%. This means that, even for issues of ca. 3bn euros, some people were made quite happy for having ventured in Greek waters - waters that had proved treacherous when the 2012 Greek PSI effectively wiped out earlier positions taken in Greek sovereigns.
The market for Greek government debt does not really converge with the - equally hesitant - one for covered bonds built on Greek banks’ loans. Still, like 400 m euro Piraeus Bank note of last June (sold at 9.75%), have shown the way. National Bank of Greece followed suit in July going for 9%.
Now, the “Hercules Project” with which the Greek Government will try and build an APS approach with which to help Greek systemic banks to offload an important part of their mountain of bad debts (some 35% of a total near 90 bn euros), will come as a further test of market intentions towards Greek risk – that is, once DGComp has given the final thumbs-up in Brussels (the SSM in Frankfurt seems tame by comparison).
“A healthy appetite for Greek risk” is a catch phrase often used in roadshows organized in London or New York; it had better materialize now, at such an important scale.