Although there are still worries over Greece's ability to meet its obligations, the current price is the highest since the restructuring of €200 billion worth of private sector debt in March produced the new ten-year benchmark.
The rally has been largely caused by the promise of Mario Draghi, the European Central Bank president, to keep the euro area from unravelling, and has been led by hedge funds.
The price of the Greek bonds overstated the likelihood of a euro exit, and said that on a recent visit to Athens the hedge fund’s European analyst had “discovered several ‘green shoots’ emerging in the Greek fiscal position which also appear to be widely ignored by the broader market”.
Among the aspects giving investors comfort is that Greece’s bonds rank equally to those of the eurozone in any eventual second restructuring, and are drafted under international law. This offers better protection to creditors than the local Greek law.
This is still a risky punt. For the foreseeable future, the only way for Greece to meet its fiscal commitments is through further aid from its “troika” of lenders – the European Commission, the ECB and the International Monetary Fund – and tensions remain high.
However, many investors and economists caution that the willingness of creditor countries in northern Europe to bankroll Greece is finite. They say the eurozone could cut off further aid when the more important stricken members are safely dealt with and no longer at risk from the contagion of a Greek exit.
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