While borrowing costs in Western Europe are soaring, Greece keeps its cost of borrowing contained, for a multitude of reasons.
On Monday, borrowing costs in Europe soared to new multi-year highs, with the sell-off in government bonds intensifying after a new rise in oil prices. This increases concerns about inflation and government finances, keeping the door wide open to interest rate hikes. Greece was the exception, with Greek government bonds once again appearing resilient to the wave of liquidations carried out by investors.
A significant factor for the bond sell-off was the comments by Fed Chairman Kevin Worth that interest rates may need to rise if inflation remains above target, fueling speculation for a US rate action later this month, just as markets see two more interest rate hikes from the European Central Bank by the end of the year, the first coming next week.
A “bright exception” to the sell-off were Greek bonds, with the 10-year yield stabilizing at 3.93%, close to the levels of last March and considerably lower than those of Italy and France. The spread against Germany is at 64 basis points and at the levels it was at before the outbreak of the war in the Middle East in end-February.
