Greek Bonds Get some Love from Hedge Funds

Someone described Greek bonds as ‘bombed out assets’ that were trading around just 17 percent of their face value.

Greek Bonds Get some Love from Hedge Funds

Well it seems there are some takers for these bonds these days. Judging from the yield on Greek government bonds maturing February 2027, which has fallen from 29 percent in May to sub-23 percent levels, and the narrowing of bid-offer spreads to a very reasonable 1 percentage point, it seems people are summoning up courage to buy these bonds as a value play, perhaps.

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A lot of these investors are hedge funds, who are of the opinion that progress within Greece politically, and in talks with the ‘troika’ could result in bailouts maturing that could, in the end result, increase the chances of a better payout on these bonds.

One such hedge fund is London-based Adelante Asset Management, according to Reuters. The fund entered the bonds around 12.5 cents on the euro and then doubled the investment at the 14 cent level.

According to CEO Julian Adams, the bonds could go as high as the low 20s, in view of the likelihood of Greece setting up acceptable cost cutting plans that could find favor with the troika. If the funds continue to flow to support Greece, the chances of a better payout on these bonds improve dramatically. Greece is looking forward to another $160 billion bailout that may materialize at a meeting of Greek Prime Minister Antonis Samaras, and German Chancellor Angela Merkel next week.

Though Greek bonds are the most illiquid of sovereign bonds, it is being observed that volumes are on the rise in the previous few days and in the range of 10 – 20 million euros per day.

Meanwhile, global risk appetite is also up on the hope that the Eurozone crisis could be ended sooner rather than later through key meetings this week and concerted action by the ECB.