Greek Yields Would Drop to 1% After Debt Deal, Varoufakis SaysErik Schatzker and Marcus Bensasson
Greece’s borrowing costs would plunge to those of other euro area nations if it can agree with international creditors over growth and its debt sustainability, Finance Minister Yanis Varoufakis said.
Greece’s benchmark 10-year bonds yielded 8.86 percent, down from as high as 11.4 percent on Feb. 2, a week after Greek Prime Minister Alexis Tsipras’s election. That level is “probably” the right price for Greek risk, Varoufakis said in an interview with Bloomberg Television in Athens.
“Investors understand that unless we grow, they can’t make money out of Greece,” Varoufakis said. “The moment there is an announcement of a sensible deal on investment, primary surpluses and debt restructuring, you will see that those yields will sink to 1 percent, in line with what’s going on in other European countries.”
Ireland’s 10-year yields dropped below 1 percent for the first time and Portugal took advantage of a bond rally to auction 1.5 billion euros of 10-year bonds at a yield of 2.04 percent on Wednesday. Both countries followed Greece into, and then exited, bailout programs during the euro area’s debt crisis.
Bondholders who held on to Greek securities through the country’s election campaign and the turmoil of ensuing funding negotiations earned a world-beating 11 percent this year, more than double the 4.2 percent profit on Danish securities, the next-best performers, according to Bloomberg indexes. Treasuries earned 1.2 percent in the same period.
Tsipras’s Syriza party platform called for writing down a large part of the country’s bailout debt and rolling back austerity measures tied to it. While Greece retreated from those positions to reach a Feb. 20 accord with euro area finance ministers that averted a financial collapse, the country still needs debt relief, Varoufakis said.
Syriza said the writedown wouldn’t apply to private bondholders, who already took losses on the country’s 2012 debt restructuring, the biggest in history.
A six-year economic slump and near-record unemployment spurred Syriza’s push to ease Greece’s public debt burden of about 175 percent of gross domestic product. Greece’s GDP shrank 0.2 percent in the fourth-quarter, its first contraction in a year, indicating the country may be heading back into recession.
“We are a party of the radical left, but we come to this with an agenda that resembles that of a reformist bankruptcy lawyer,” Varoufakis said. “We are facing a public and a private sector that are more or less bankrupt.”
“And what we need to do is we need to restructure them, we need to reform them, we need to restructure their debt and we need to give people hope,” he said.