GGBs Tighten Vs. Bunds At Margin In Wake Of Expected Election Result

10-Year Greek paper outperforms to start the week as the market reacts to the ND’s attainment of a parliamentary majority (which was in line with expectations) in the second round of the Greek national election.

• PM Mitsotakis is set to install a new Finance Minister (more details from our Political Risk team here)
• The 10-Year GGB/Bund spread settles around 120bp, registering the tightest level seen since ’21 in the process, while the 10-Year GGB/BTP spread tightens, but doesn’t threaten cycle/all-time tights.
• The round-number bias surrounding the 120bp level, coupled with the recent run of meaningful tightening and the fact that the election outcome matched wider expectations, is limiting the nature of the move in GGBs.
• Focus now turns to any ad hoc commentary/action from the sovereign rating agencies, given the expected fiscal trajectory of Greece and heighted expectations surrounding the eventual attainment of IG status (DBRS Morningstar have the next scheduled update, which isn’t slated until 9 September).
• A quick reminder that one upgrade to IG status is not enough for benchmark bond index inclusion.