High traffic and yield declines were recorded today in the bond market. Investors welcomed the result of the national elections in a particularly positive way, as it signals political stability and the continuation of reforms.

Besides, the investment houses had made a pre-election commitment that under these conditions they would proceed after the elections to upgrade the country’s credit rating to investment grade. This development is already discounted by the market as of today the spread of 10-year bonds against their German counterparts fell to 1.37%.

Indicatively, Eurobank Stock Exchange in its comment yesterday states that the comfortable self-reliance of New Democracy after the second elections leaves room for the country’s credit rating to be upgraded earlier than the market expected, with the next catalyst to be found in the Fitch review on June 9.

Along the same lines, Pantelakis Securities reports that the market will “welcome” the continuation of ND’s economic policies on the reform and development front.

Despite the rally in Greek bonds, Citi believes that the country’s upgrade to investment grade creates conditions for further price rises and yield declines. This position is based on the consequences of achieving investment grade, such as the greater liquidity that banks will be able to obtain from the ECB by pledging Greek bonds (on which a smaller haircut will be imposed) as well as the participation of Greek bonds in bond investment indices which have the investment grade.

In the secondary bond market today and more specifically in the Electronic Transaction System (EDAT) of the Bank of Greece, a high trading activity was observed as transactions of 260 million euros were recorded, of which 176 million euros related to purchase orders.

The performance of the Greek 10-year-old bond formed at 3.81% from 4.04% which closed on Friday against 2.44% of the corresponding German title, bringing the spread to 1.37% from 1.65% at the end of the previous week.