The economic situation in Greece continues to be dismal. The latest depressing headlines concern businesses that are packing up and leaving the country (Costa Coffee may be leaving, Citi is closing half of its branches).
But at the same time, Greece has enjoyed a solid run in the financial markets.
The feeling is that a deal to give Greece a bunch more money, and just push off its problems in the future, is at hand. And yields on 10-year Greek debt have fallen to a post-restructuring low.
Here’s a chart going back to just before the restructuring, of Greek yields, via Bloomberg.
On the equity side of things, this chart from Also Sprach Analyst, showing that Greek stocks have outperformed China this year, has gone viral.
Photo: Also Sprach Analyst
Basically, Greece is trading exactly like you’d expect any ultra-leveraged entity to trade like. The only question is whether it goes bust or not. Reduce the odds of a total bankruptcy a little bit, and you can get a huge rally even if the fundamentals are still bad.
One side note on this: The first time we ever wrote about Greece as a sovereign debt risk was on Thanksgiving day, 2009, when Dubai World went bust, and everyone started talking about the next big blowup threat. Greece isn’t anywhere close to be out of the woods, but at least on the financial markets side, we’re talking about a reverse trend of Greece edging closer to some stability.
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