Just eight months ago, Greek government 10-year bonds were selling at a 31-per-cent yield. Now the yield is flirting with single digits – 10.5 per cent on Thursday morning. That’s a remarkable shift, but it would be more remarkable if the market were less distorted.
Yields are down because the country’s fiscal and trade positions look less dire. In 2012, the primary deficit, the fiscal deficit before interest expense, was 1.8 per cent of GDP, down from 3.1 per cent in 2011 and ahead of the government’s target. The 2008 current account deficit of 15 per cent of GDP has melted away – the measure could be in balance in 2013.