EGBS: 10-year Greek Spreads To Bunds at Tightest Since March

The continued recovery in European equities from last week’s lows has helped 10-year peripheral spreads tighten, with Italian and Greek spreads seeing the largest compression.

• The 10-year GGB/Bund has reached its narrowest since March, currently around 94bps (~2.5bps tighter today). Outperformance versus peers (e.g. France, Spain, Portugal) may have been aided by today’s Q1 Eurozone fiscal data release.
• The 4Q NSA rolling sum of the Greek primary balance register a surplus for the fourth consecutive quarter at 3.0% of GDP (vs 1.9% in Q4 2023).
• The debt/GDP ratio meanwhile eased to 159.8%, vs 161.9% in Q4 2023 and down from a post-Covid high of 210.3% in March 2021.
• The improving Greek fiscal picture prompted ratings upgrades from S&P, Fitch and Moody’s in 2023, bringing the country’s debt back to investment grade for the first time in over a decade.
• S&P also issued an Outlook upgrade (to Positive from Stable) in April this year.
• The autumn ratings wave begins with Moody’s on September 13, which may provide an additional catalyst for further spread compression and outperformance against peripheral peers.