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Following Greece's general elections on July 7 and the absolute majority secured by the conservative New Democracy party – with 158 seats in the 300-seat parliament – the new government led by premier Kyriakos Mitsotakis, a centre- right politician, is focusing on the economy.
Economic growth prospects now now look much brighter than a year ago, when in August 2018 Greece came out of its strict surveillance programme by the lenders following its third major bailout of July 2015.
The electoral success of New Democracy has sent out a strong positive message to international markets, especially since it has removed, to a large extent, the political risk factor which has haunted the Greek economy since its first bailout of May 2010.
Already, following the massive lead by ND in the euro elections at the end of May, market sentiment in Europe and elsewhere had turned positive, with traders having taken for granted the political shift.
Businesses have by and large welcomed the coming to power of a pro-business and investment friendly government.
As a result, foreign funds piled in and sent trading volume at the Greek bourse soaring with the stock index up by more than 35% this year.
At the same time, Greek sovereign bonds saw their yields dive to historic lows, with that of the 10-year benchmark falling throughout June from a high of 6.0% to just above 2.0 percentage points, while the spread against the German bund dropped to 244 basis points, the lowest since January 2010.
The strong rally recorded by Greek bonds in the last few weeks continued all this week with the yield of the 10-year bond reported at 2.29% on Friday.
Quick to take advantage of favourable market conditions, the Greek government announced plans to move immediately ahead with the placement of a EUR 2.5 bln 7-year bond bearing an interest of approximately 2.5%.
Interest by foreign banks to co-manage this new placement is strong and already six lenders including Morgan Stanley, Deutche Bank, Nomura, BofA, Barclays and Societe General, have confirmed their participation.
With this new bond, Greece effectively overshoots its 2019 target of EUR 5.0 bln which was raised earlier this year.
One should note that the decline of the Greek state's cost of borrowing has been quite impressive, as the 10-year note has fallen by about 50%, from 3.9 percentage points at the start of the year.
Most of the slide has happened since the May 26 European elections, after which the benchmark yield lost 137 bps.
According to well-placed sources at Greece's Public Debt Management Agency (ODDX), which is in charge of all government borrowing, the full subscription of the new bond placement, which will most likely be announced on July 15, is more or less guaranteed since the change of mood in international markets is evidenced by two successful bank placements which preceded the government one.
Earlier this week, the National Bank of Greece (NBG) announced that it had raised EUR 400 mln in a Tier II 10-year bond with very favourable conditions as it was hugely oversubscribed, with offers reaching EUR 1.65 bln.
Two weeks ago, another major Greek lender, the Bank of Piraeus, had also raised successfully an equal amount by placing a similar bond in the international markets.
