Inputs 5 billion euros are estimated to have been realized in shares and bonds of the Greek State as a result of the credit upgrade of the Greek economy.

According to a study published in the latest financial bulletin of the Bank of Greece, from the fourth quarter of 2022 to the third quarter of 2023, the increase in investments in bonds and shares is estimated at 5 billion euros, of which 2.9 billion EUR 2.1 billion relate to positions in shares and EUR 2.1 billion to positions in bonds.

As pointed out in the study signed by Charilaos Giannakidis, Louis Karathanos, Athanasios Kontinopoulos, Athanasios Lambousis and Petros Miyakis, “the upgrades of the credit ratings of the Greek economy and, above all, the prospect of upgrading to the investment category led to a significant increase in the positions of of investment funds in Greek government bonds”.

The study examines whether increases in investment funds’ placements in Greek bonds exceeded the general trend in the market and assesses the impact of increased demand on Greek government bond yields. The findings indicate that the change in the outlook of the sovereign credit assessment of the Greek economy to positive by Standard and Poor’s in April 2023 led to a significant increase in the positions of investment funds in Greek government bonds, relative to other euro area government bonds. This development is estimated to have led to a reduction in the yields of Greek government bonds corresponding to approximately 80% of the fall in their yield differentials against the reference German bonds.

Because the results are remarkable

These results are remarkable for two reasons. On the one hand, the increase in demand for Greek securities was observed at a time when investment funds were reducing their positions in bonds with low credit ratings.

On the other hand, the decline in Greek government bond yields, largely explained by the increase in the positions of international investment funds, outweighed the upward pressures observed on bonds internationally due to interest rate increases. Consequently, the findings of the study highlight the importance of upgrading the sovereign credit rating of the Greek economy to the investment grade, as, among other things, it brings about an increase in the demand for Greek government bonds and, therefore, a significant improvement in the borrowing costs of the Greek Public.