Greece's 10-Year Government Bond Yield Falls Below 1% for the First Time Ever

[Asia Economy Reporter Jeong Hyunjin] The yield on Greece's 10-year government bonds fell below 1% for the first time in history. This reflects the market's assessment that Greece's economic recovery has strengthened as the government implemented high-intensity austerity measures and structural reforms.

According to Bloomberg on the 12th (local time), the yield on Greece's 10-year government bonds closed at 0.954%, down 4.79% from the previous trading day. During the economic crisis, the 10-year bond yield exceeded 30%, but it has since sharply declined and fell below 2% in the second half of last year.

After experiencing the economic crisis in 2010, Greece received bailout funds from the International Monetary Fund (IMF) and endured extensive fiscal austerity policies. As a result, Greece completely graduated from the bailout program this year, marked by the closure of the IMF office in Athens. Greece also returned to the international bond market by issuing government bonds early last year.

Regarding the decline in bond yields on this day, foreign media analyzed that it was influenced by improved expectations for the Greek economy. Kyriakos Mitsotakis, the conservative-leaning Prime Minister who took office in early July last year, has been implementing market-friendly economic policies and reorganizing fiscal matters. On this day, Prime Minister Mitsotakis celebrated on his Twitter, saying, "We have reached a point that was once thought impossible," and added, "Greece has now become a growth engine with tremendous potential and opportunities for global investors."

However, it is difficult to say that the Greek economy has fully recovered. Since the 2010 economic crisis, Greece still maintains a sovereign credit rating at the 'junk bond' level. Although Fitch raised Greece's credit rating two notches from BB- to BB last month, it remains below investment grade. Greece's government debt-to-GDP ratio is still above 180%, far exceeding the European average.

Considering these factors, foreign media also analyzed that the fact other European countries maintain negative interest rates is one of the elements that have pushed up Greek bond yields. While about two-thirds of government bonds in the Eurozone (19 countries using the euro), including Germany and Belgium, maintain negative yields, Greek and Italian government bond yields remain positive, making them attractive to investors.

MarketWatch analyzed, "The Greek government can now secure funding more cheaply than the U.S. government." Ironically, the Greek economy is currently being evaluated more positively than the U.S. economy, which is considered robust.