ECB ok's Athens' participation in QE stimulus plan amid Covid-19 crisis; Greek bonds rally spectacularly on Thur.

Thursday, 19 March 2020 14:06
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The ongoing and increasingly explosive coronavirus outbreak in Europe, now described as a global Covid-19 pandemic by epidemiologists, has knocked down at least one previous crisis-era barrier for Greece, as the European Central Bank (ECB) on Wednesday announced that the country will be included a new QE stimulus program, with up to 12 billion euros of Greek bonds eligible.

The previous "quantitative easing" schemes by the ECB had left Greece out during the painful crisis years after 2014, while even after the third bailout ended in August 2019, the country's credit rating had still not reached investment grade - a necessary prerequisite for QE qualification by a Eurozone member.

"Practicable support for the country... and an indication of confidence in the government's maneuvers," was the way Greek Finance Minister Christos Staikouras described the decision, which includes an overall outlay of 750 billion euros for debt-buyback stimulus program.

According to the government side, Greek Prime Minister Kyriakos Mitsotakis personally communicated with ECB Managing Director Christine Lagarde this week to request Greece's participation in the program, amid the Covid-19 crisis.

The development on Thursday translated into a spectacular rebound for Greek bonds, with the spread for the benchmark 10-year bond dropping by more than 200 basis points in the day's initial trading. The yield for the specific issue was hovering at 2 percent on Thursday, halved from the 4-percent range just one day earlier.

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