Greek Outperformance Noted After Election Results

GGBs outperform wider EGBs across the term structure after the ruling party shows well in the Greek national elections, albeit not well enough to form a government by itself, which will probably mean that PM Mitsotakis seeks a second round of elections with the aim of attaining a governing majority. As we touched on last week, a government led by the incumbent party is a more pro-business/economy outcome, with the party’s outperformance in the first round no doubt generating deeper interest in the eventual attainment of investment grade sovereign rating status for Greece, facilitating today’s early tightening.

• 10-Year GGBs are ~4bp tighter vs. Bunds while the remainder of the peripherals are flat to a touch wider at that point of the curve.
• The previously alluded to hawkish ECB rhetoric is probably keeping the GGB move in check and applying a modest widening bias elsewhere, excluding Portuguese 10s, which are flat vs. Bunds, aided by Moody’s affirming the country’s sovereign credit rating (Baa2) on Friday, alongside an upgrade of its outlook to positive from stable. The lack of an update on Italy from Moody’s (currently Baa3; Outlook Negative) was also noted.