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Markets bear IMF out

There was no response from markets, to welcome the formal return of Greece, without the umbrella of the European Mechanism. 

Having anticipated the completion of the third financing program for a long time, the markets welcomed Greece's exit with a slight decline in the 10-year yield to 4.221%, mainly due to the decompression of Italy's bonds, the credit of which will be assessed eventually shortly by Moody's. As far as the 7-year-bond, which has been seen as a barometer for the next issue of bonds by the Hellenic Republic, it moved around 3.9% with a yield of around 97%, which is 2.5 percentage points from the desired rate.

Violent reaction from the Stock Exchange

The stock market's reaction was even more negative, almost violent. While the rest of the European stock exchanges were in the black, in Athens everything was "reddish", with the result that the General Index recorded new losses of 1.04%. The image of the bank index, which lost another 2.44%, is particularly disappointing, with its image showing a flat line from 2015 onwards.

Handouts "annoyed" bond markets

In addition to the credibility trauma that has been caused in the Stock Exchange, the general nervousness and the bond markets' performance are attributed mainly to the vulnerability of the Greek economy to exogenous factors, not least to the government shooting itself in the foot within the country, such as the cultivation of a hand out climate. Greek bonds, for better, or worse, are in the "garbage" category, Greece is still in the high risk zone and a sneeze in the markets could easily turn into pneumonia.

The other factors that do not help

There is no visible haven, a mitigation of tensions, on the visible horizon. The Turkish crisis is currently in sleeper mode, but the problems in the fundamental structures of the neighbor's economy as well as the unpredictable moves of President Erdogan can rekindle the "fire" at any time. It should also be borne in mind that the rating agencies have announced, in essence, further deterioration of Turkey's creditworthiness.

But the real danger is Italy. Already aggressive funds have taken positions, awaiting developments in the autumn, when it will show if the Italian government intends to align with the directives of the European institutions - in essence, of Berlin - to take all necessary fiscal consolidation measures.

The climate is heavier if one counts end-to-end QE titles that functioned as shock absorbers in sovereign debt markets, changes in ECB heads and SSM heads, elections in Bavaria that may cause new frictions in the government coalition of Angela Merkel .

Should Greece issue a bond?

"Greece has no reason to hurry to issue a bond," is the argument from government lips before and after the end of the program. The truth is somewhat different. Indeed, Greece has covered its lending needs for about two years, with the notorious "pillow" of 24 billion euros and high primary surpluses. However, as official sources point out, Greece has to convince itself that it is a serious player and in order to achieve this, it must cover its annual financing needs with bond issues two or three times over the course of the year , having the "pillow" for the purchase of expensive Debt eg. the IMF loans.

Why the IMF is justified

The latest IMF Sustainability Analysis would say that it is justified in terms of the interest rate estimates that Greece will find when it knocks on the door of the markets. According to the Fund, the initial rate will be 4.5% - that is, as it is now - with a fluctuation between 4% to 6%, due to long absence and large debt. Over time, the interest rate will fluctuate according to the country's risk by rising or lowering by 3 basis points for every 1 unit of debt, rising or decreasing, as a percentage of GDP.