Investors extend Greek bond bets as confidence rises on bailout

Bloomberg

Investors are extending the maturity of Greek bond holdings as they become more sanguine about the nation’s prospects after creditors agreed a bailout deal.
The latest agreement by euro-zone finance ministers ended months of speculation over whether Greece would meet large bond payments due in July and spurred a rally in the country’s debt. PGIM Fixed Income and Greylock Capital Mgmt LLC are looking at moving investment further down the Greek bond curve, while Citigroup Inc. sees yields as “very attractive” in comparison to other regional assets.
“If things go well, there’s a lot of upside,” said Mike Collins, senior investment officer at PGIM, which already owns some of the country’s short-dated bonds. “As we lose exposure to front-end Greece, we’re looking at other opportunities to maybe add back some of the exposure in longer maturities.”
Greylock, which invests in undervalued, distressed and high-yield assets, used the recent price action to exit the short end, and switch to longer maturities of Greek bonds and bank stocks. “What was announced clearly favors those trades,” Diego Ferro, its New-York based co-chief investment officer, said in emailed comments. The new loans at the Eurogroup meeting in Luxembourg totaled 8.5 billion euros ($9.5 billion), predicated on a 2 percent primary surplus from 2023 until 2060. The International Monetary Fund will hold off on more loans until it receives assurances that Greece’s 315-billion-euro debt — the biggest in Europe as a percentage of gross domestic product — will become sustainable. That would require some debt relief. Since the financial crisis, Greece has been Europe’s laggard with constant doubts over whether the country would be able to meet its debt obligations. The recent rally comes amid a brightening picture for the rest of Europe too, with the European Central Bank slowly moving toward tapering its extraordinary package of stimulus measures, while political risk has largely dissipated since the French and Dutch elections.