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The Impact Of Greek Elections

26 January 2015 by lberuti

Today’s comments are unanimous, the results of the Greek elections over the week-end had no impact whatsoever on investors’ risk appetite generally speaking. There was a small blip at the open this morning, but when it was clear that there would be no real follow through, risky assets begun to rally across the board. That was certainly true for credit indices, and their risk premia closed tighter without exception. But if you look a bit more closely, buying Greek risky assets was much cheaper today than it was last Friday. The Greek 10 year bond benchmark lost 5% for instance. OTE’s ( Hellenic Telecommunications Organisation SA ) 5 year risk premium had to trade more than 50bps wider at 425bps before buyers of risk eventually emerged, and it actually felt more like profit taking rather than new risk being added. It would sound reasonable for investors to have a bit more information before deeping their toes back into Greek waters. It remains to be seen whether they can resist for long the temptation of juicier yields.