To certify the historical turning point is an article by the Financial Times, which tells what happened in the last hours: in the midst of a sell off that invested world bonds (eye also to the sell off on Treasuries, which brought the ten-year yields of government bonds to bring the gain back, in a session, stronger than the Election Day of 2016), Greek bonds gave a good demonstration of solidity, with ten-year rates that remained steady at around 1.10%. Ten-year BTP rates, instead, they climbed up yesterday at 1.16%, therefore higher level.
Today it is even worse, with the Italian ten-year leaping up to 1.23%, record since August, and the spread that ignites at 147 (Bloomberg data).
It certainly does not help the sentence uttered by the leader of Italia Viva and former premier Matteo Renzi which, in an interview with La Repubblica, said:
"If the Democratic Party wants to vote, say so. If the parliamentarians of the PD have decided to go against the wall, they have the duty to communicate it to the country and reveal it in the Chamber. Returning to the vote is madness, mass suicide ".
Greek bonds: an assist comes from the solid GDP of Greece
The numbers confirm what has been leaked in recent sessions and even weeks: investors looking for yields in the Eurozone seem to be now oriented to prefer Hellenic paper, preferring it to the Italian one, especially if we consider the usual known tensions that characterize every Italian government that comes to power, including the current one (see Renzi's statements, and not just today).
This is all the more true, then, if Italy is also confirmed bottom up in terms of growth of the euro area, with the European Commission being forced to revise its estimates on the upside debt-GDP, structural deficit and nominal deficit, of the country.
Among other things, if for Italy the European Commission – as engraved in its autumn economic forecasts – provides for a “growth” of + 0.1% in 2019 for the Italian GDP and one for + 0.4% in 2020 (downgrade from the previous + 0.7% expected), for Greece the estimates are of an expansion of 1.8% in 2019 and of an acceleration up to + 2.3% in 2020, followed by a solid growth of 2% in 2021 (compared to the always sad + 0.7% expected for Italy in 2021).
Hellenic growth will outperform, among other things, that of the entire Eurozone, so an average growth rate of 1.4% is expected in 20202, with Italy reporting the worst trend (GDP, precisely equal only at + 0.4% in 2020) e Malta which will be the best, with a jump in gross domestic product of well + 4.2%.
To trigger the appetite for Greek bonds also the recent promotion arrived last month from Standard & Poor’s, which has revised its Greek sovereign debt rating upwards to BB-.
Referring to Greece and Italy, the Financial Times writes that the yields of both government bonds – which flew into the euro area sovereign debt crisis – remain very low by historical standards ". Said this, "the rehabilitation of the Greek bond market continues to confirm the most spectacular ".
The British newspaper recalls that "Greek rates shot up above 30% at the end of 2011, before Athens defaulted on its debt, thereby imposing losses on its private creditors ”. And now, those same yields travel just above 1%. "Investors – it is explained – continue to be encouraged by the relatively solid recovery, this year, of the Greek economy, in the face of the weakness that continues to distinguish the Eurozone ”.
Furthermore, "the establishment, in July, of the center-right government led by Kyriakos Mitsotakis has increased hopes of accelerating market-friendly reforms ".
It must be said that another factor that benefits the Greek card with respect to Italy is that “the small size of the Greek bond market – much of the huge debt burden is represented by loans at low interest rates received from the EU and the IMF following a series of bailout operations – it means there is less immediate pressure on public finances compared to what there is about Italy, which can only count on the markets to refinance the immense ballast of its debt ".
Now, it is true that, despite the recent S&P upgrade, the Greek debt rating remains in "junk" territory. "However – continues the Financial Times – some investors are betting that a relatively positive growth outlook has paved the way towards a return to an investment grade rating.
"Such an upgrade would allow Greece to enter the ECB's program of asset purchases." Everything, "while the Italian economy remains mired in weak growth. And, although S&P has a much higher rating on Italy than Greece's, the debt outlook is negative ”.
The FT concludes by recalling the new government coalition that was formed in Italy in September, the one that gave birth to the M5S-PD executive, but added that "some investors fear the return to political instability last year, when the previous government clashed with the European Union on the budget deficit ". Even if it has to be said, in this regard, that just yesterday the EU Economic Affairs Commissioner, Pierre Moscovici, wanted to make the appropriate distinctions between the current government and the M5S-Lega in discussions with Brussels of the budget laws.
Other numbers certify overtaking Greece over Italy. The Italy-Germany spread closed yesterday, according to what was reported by Reuters, to 151 basis points, while it Greece-Germany spread it stopped at 150. Of course, it is only 1 point of difference, which however says a lot, if we consider that the spread between Italy and Greece, in 2016, it leaped up to 1000 points and that now, however, according to some analysts, it would be close even to zero.