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A pearl from Aegean Sea

This bond of the Greek Republic with a cut of 1,000 euros could yield 3%.

In our daily search for undervalued bonds, today we came across a real rarity, or a government bond in euros that could yield 3% if bought at a good price.


To date, the euro government bonds that offer the greatest returns are those of the Greek Republic. Of course they are risky securities as they are exposed to the European country with the highest debt / GDP ratio. Not surprisingly, all rating agencies, despite recent improvements, place Greek debt at a speculative level: B+ ⬆︎ (S&P), B1 (Moody's), BB- (Fitch), BB(low) (DBRS).

Greece's long-term bonds have a 1.95% return for 10 years, 2.35% for 15 years, and 2.7% for 20 years. They are on average quite high if we consider that for example the 10 years of Spain makes a paltry 0.15%.

The security

In 2004, Greece issued approximately 1B euros for an international security maturing on 17 July 2034 paying an annual coupon of 5.2%. All the details in the XS0191352847 sheet.

The security is listed on the Luxembourg Stock Exchange. The last exchange took place at 120, and now the book shows a 121.01 bid and a 133.5 ask. The exchanges are relatively modest and infrequent, and this explains the wide difference between bid and ask.

Having patience and being able to buy it at around 122, it would mean a 3% yield to maturity, so much higher than the 15-year benchmark.

A very small share within a well-differentiated investment portfolio could make sense, but with great caution.

Don't underestimate the risks

It is a risky security. Greece is a heavily indebted country. The title is long-term so it is exposed to strong price changes. Furthermore the bond trades little so it may be difficult to exit the investment quickly without incurring in losses.

Bonds, Governmental, Governments, States, Europe developed, Greece, EUR, Fixed Rate, Income, Ideas

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