Greece’s bonds are so volatile they’re more like equity than debt, according to Greylock Capital Management LLC.
Even so, they’re “bullet proof” because investors won’t be forced to repeat the experience of 2012 and take a loss in a restructuring, said Hans Humes, the money manager’s founder, who’s helped negotiate restructurings from Belize to Greece.
“It’s not trading like a European bond, it’s trading like an equity,” Hume said Monday in a Bloomberg Television interview. “It’s a bit of a high-stakes game but ultimately, if things work out, the upside is a lot more than the downside if it doesn’t.”
Facing a potential European Central Bank restriction on maintaining life support for its financial system, Greece persuaded its skeptical German-led creditors that it’s serious about delivering the policies needed to escape a default. The country repaid money to the International Monetary Fund Tuesday, with more payments to the Washington-based lender and redemption of bonds held by the ECB beckoning between now and September.
Greece’s bonds tumbled alongside other euro-region debt in recent weeks, sending the 10-year yield to a 2 1/2-year high of 13.93 percent on April 22. It was at 10.95 percent on Tuesday, up from as low as 8.38 percent in January.
Greek bonds have lost 1.9 percent this year, one of only two euro-area bond markets to fail to generate a return for investors, based on Bloomberg World Bond Indexes.
While Greylock was among the investors that took losses in Greece’s debt restructuring three years ago, Humes dismissed suggestions he should be once bitten, twice shy about the nation’s bonds.
“There’s no way they come back to us and force us to take an additional haircut,” he said. “So really, private-sector bonds are bullet proof.”