A Greek Odyssey

With 10yr yields for Greece debt now below 10 yr Gilts, Greece is able to borrow on better terms than the UK.

Key Points

· Greece has certainly witnessed some tough economic times, with their GDP still about a quarter lower than it was prior to the Great Financial Crisis of 2008. 

· Yet, years of recent fiscal stewardship has permitted Greece to exit the special measures levied upon them by the EU and allow them to borrow on international debt markets again.

· With less exposure to the energy crisis, and a recovery in tourism, Greece, unlike the UK, has seen its GDP go above its pre-Covid levels.  Financial markets have responded positively to the recent elections results – the possibility of more years of stable, centre-right Govt.  Greece can now borrow at 3.7%.

· The UK, on the other hand, has witnessed a period of political instability - three Prime Ministers and four Chancellors of the Exchequer in the last 12 months, and three General Elections in the space of four years. 

· Bond markets seem to have passed judgement on our relative economic state (sluggish growth) and fiscal prospects (persistent public spending).  Bond yields are approaching the peak levels we saw under Liz Truss.

· Whilst Gilts have become a more volatile asset class and not behaved like the low-risk asset that many assume them to be, it doesn’t mean a negative view on UK equities, some of which have a large element of overseas earnings and generally trade on a significant valuation discount to their global peers.