Piraeus Bank: The expansion of the margin of Greek bonds is overrated

Piraeus Bank estimates that the margin of Greek bonds against the corresponding German securities is overvalued.

According to the Bank’s analysts, significant pressures were also observed in the interest rate spread (spread) of the Greek 10-year period against the corresponding German bonds in April as it increased by 39 bp to 241 bp while expanding by 13 bp in the first 10 days of May to 253 bp April 2020 levels.

According to the Piraeus valuation model, the spread at this level is considered relatively “overpriced” by 55 bps in terms of macroeconomic data, but has not reached an extreme value according to statistical analysis. The fundamental figures with the largest contribution to this upward change are located in the deterioration of the precursors for economic activity but also in the deterioration of the international investment climate. Equally important is that according to the Government Bond Market Risk Allocation Index, the possibility of further downward pressure on the 10-year spread (downside risk) continues to increase for the 2nd consecutive month.

Today, however, the prices of both Greek and European bonds showed a limited positive reaction, with the result that yields fell slightly.

In the domestic bond market and more specifically in HDAT, transactions of 74 million euros were recorded, of which 18 million euros related to purchase orders. The yield on the 10-year bond stood at 3.68% against 0.93% of the corresponding German bond, resulting in a margin of 2.65%.

In the foreign exchange market, the euro is moving slightly higher against the dollar as the European currency traded early in the afternoon at $ 1.041 from the level of $ 1.0398 opened by the market.

The indicative price for the euro / dollar exchange rate announced by the ECB was set at 1.0442 dollars.

SOURCE: AMPE