World Government Bond Forecasts: Greece

Until recently the Greek Bond market was known for its fairly low turnover and lack of liquidity. International investors were reluctant to invest because of structural difficulties in the Greek economy. Although liquidity and size still lag against other major bond markets, the government securities market has improved remarkably over the last five years. A series of reforms recently introduced has accelerated the pace of growth of the Greek Bond market, which is dominated by government issues.

The most noteworthy development in the Greek Drachma Bond market in recent years has been the creation of the secondary market. Activity in the secondary market between banks and other financial institutions is increasing, with more participants added daily from domestic and international markets. However, the Greek corporate debt market is almost nonexistent.

Because of high inflation, Greek interest rates have been the highest in the European Union. High real interest rates, the policy of limited depreciation of the Greek drachma and the tax exempt status of the bonds caused foreign investors to purchase Greek Government issues.

Primary Market

The Greek Treasury during the last decade has issued a variety of instruments to tap specific market segments.