Brave Enough to Invest in Greek Bonds? Here's How

It is not easy for investors to buy Greek government bonds. Lack of access and liquidity and the size of investment required puts Greek sovereign debt out of reach for many. The only way to buy a Greek government bond is through a bank or broker, or through a hedge fund that has built significant exposure.

However, if you're willing to go though the trouble and possess the necessary capital and tolerance for risk, then acquiring Greek debt may be worth the effort. Greece has been the go-to market for yield hungry investors ever since the country underwent debt restructuring in 2012. The S&P Greece Sovereign Bond Index has put in a one-year return of 12.47% as of July 2020. Over the past five years, the index has returned 19.83% annually.

The Risk Is Considerable

Investing in Greek government bonds is appropriate only for financially sound investors with a high tolerance for risk. As of April 2020, Fitch Ratings had assigned Greek long-term debt a BB rating, which denotes an elevated risk for default relative to other issuers. 

There is a very real possibility of losing every dime of a minimum $100,000+ investment. Therefore, only investors who can afford to lose that kind of money should even consider looking at Greek debt as a possible investment.

The Argument for Positive Returns

The arguments for an investment in Greek debt paying off handsomely are essentially twofold. The first is a belief that the Greek economy and the Greek government won't simply totally collapse and default on every obligation imaginable across the board. While that's not a given, advocates for investing in Greek debt make the argument that such a catastrophic total collapse is not really among the likely possibilities and that the total doomsayers are being overly pessimistic. Greece is in a financial mess, but it's such a mess that at this point that about the only direction left may be one of upward improvement. This has led a handful of long-term investment analysts to recommend the purchase of Greek 30-year bonds.

The second linchpin of the argument for investing in Greek debt is the fact that thanks to its 2012 debt restructuring, other than its current bond obligations, the Greek government has no other significant debt obligations until 2023. This was the argument put forward by JP Morgan Chase when, in 2014, it recommended the purchase of five-year Greek bonds, due to mature in 2019, long before that 2023 date. JP Morgan Chase was one of the managers of the sale.

How to Acquire Greek Bonds

There are really only a couple of avenues open for purchasing Greek bonds. There are no Greek bond ETFs currently available. There are a couple of hedge funds, such as Dan Loeb's Third Point, that have made significant investments in Greek debt, but those don't represent an investment purely in Greek bonds. Basically, the only options for purchasing Greek bonds are going through a bank or brokerage firm, and either option requires a minimum investment of over $100,000.

Most of the major banks, such as JP Morgan or Citibank, can purchase Greek bonds for an investor. However, because of the very low liquidity in the market, the minimum purchase required is 100,000 euros, a bit more than $100,000.

The other option is to go through a brokerage such as Fidelity or Charles Schwab. Greek bonds aren't listed as available investments on their websites, but you can contact a broker specializing in foreign bonds to make the purchase on your behalf. Again, a minimum $100,000+ investment is required, and because of the extremely low liquidity in the market, the broker cannot guarantee to manage a favorable purchase price.

Article Sources
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  1. Jeromin Zettelmeyer, Christoph Trebesch and Mitu Gulati. "The Greek debt restructuring: an autopsy," page 2. Economic Policy. July, 2013.

  2. S&P Dow Jones Indices. "S&P Greece Sovereign Bond Index."

  3. Fitch Ratings. "Greece."

  4. Fitch Ratings. "Rating Definitions."

  5. Jeromin Zettelmeyer, Christoph Trebesch and Mitu Gulati. "The Greek debt restructuring: an autopsy," page 48. Economic Policy. July, 2013.

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