Citi: Greek Election Result Supports Further GGB Outperformance

Citi note that “the incumbent ND beat poll indications on Sunday to improve on its vote share from the 2019 election. Whilst this was not enough for a majority in Sunday’s election, a repeat of this performance would ensure victory in the second election - likely by July - as bonus seats are reintroduced (more clarity on this is likely during coalition talks over the next 9 days). Greece is now likely to see policy continuation supporting strong GDP growth, primary budget surpluses and declining debt/GDP. This strengthens the case for rating upgrades to IG, which would then open the door to inclusion in IG bond indices and ease collateral haircuts with the ECB. Therefore, in a change of view and despite already sharp GGB spread tightening, we now expect GGB spreads to tighten further in the near-term and target 140bp for 10-Year GGB-Bund spread.”