This is emphasised by the way sovereign bond market have reacted to Greece missing its €300m IMF payment on Friday.
“Bond markets seem to be largely unfazed by Friday’s news that Greece didn’t make a payment due to the IMF, but will instead bundle all of its June payments together,” said Alan Higgins, UK CIO for Coutts. “Yields on 10-year bunds are hovering near their recent lows while Greek 10-year bond yields are well below April’s highs,” he added.
“We maintain our view that it is in the best interest of all parties for Greece to reach agreement with its creditors, avoid default and stay in the eurozone – and a deal will ultimately be reached. That’s another reason to avoid expensive ‘safe-haven’ government bonds,” Higgins noted.
Whether something very dangerous is happening or whether it is just a largely harmless quirk of market behaviour that can happen periodically is far from clear at this stage.
If it is the former then investors will need to batten down the hatches for a summer storm, but if it is actually the latter this could be great buying opportunity.
