Greek bonds are already trading as if the country has regained investment grade, this is according to financial analysts who deal with Greek government debt. Investors view Greece’s return to investment-grade credit ratings as highly likely, considering the New Democracy Party’s victory in the recent election and the expectation of continued reforms. The drop in borrowing costs this week has already led the bonds to trade as investment-grade paper, analysts say.

Greek 10-year bond yields, which currently stand at around 3.9%, are now trading approximately 50 basis points below Italy’s, despite Italy having investment-grade credit ratings. The decline in Greek bond yields following the election result has led to the lowest risk premium over German bonds since 2021.

Since the end of its bailout program in 2018, Greece has regained market access, reduced its public debt, and is expected to outpace the average growth rate of the European Union this year and next. A return to investment grade would hold significant importance for Greece, as it would make Greek debt eligible for government bond indexes, attracting a larger pool of global investors.

However, analysts caution that the anticipated upgrade, potentially in October from S&P Global Ratings, is already priced into the market and may not lead to a significant reduction in Greek bond yield spreads relative to German bonds. The official inclusion in indexes could attract index buyers, but there might also be selling from investors who had bought Greek debt in anticipation of the upgrade. Therefore, any rally on the back of the upgrade is expected to be limited.