Greek stocks and government bonds have rallied on Monday after the recent election results. The incumbent New Democracy party beat poll indications in Sunday’s elections, albeit without ensuring a majority. Global X MSCI Greece ETF (GREK Quick QuoteGREK - Free Report) was up 7.5% on May 22.  

The Greek prime minister Kyriakos Mitsotakis' conservative party has achieved a resounding triumph in the national election. Nevertheless, due to the existing proportional representation electoral system, Mitsotakis' 40% vote share fell short of securing a majority government.

In light of this, the prime minister has expressed his intention to call for a second election, aiming to solidify his victory without relying on a coalition partner. The proposed second election would take place under a revised electoral law, which grants additional seats to the winning party.

Greek Assets Have Been Gaining

Despite already sharp GGB [Greek government-bond] spread tightening, Citigroup’s rates strategists see scope for further outperformance, per Wall Street Journal. Citi targets 140 basis points for the spread between 10-year Greek and German Bund yields, compared with 159bps as of Friday close.

The spread is last at 143bps, while 10-year benchmark Greek government bond yields fall 14 basis points to 3.869%, according to Tradeweb, as quoted on WSJ. The benchmark Athens Stock Exchange General Index jumped to its highest level in almost a decade, with a gauge of bank shares rising 16%. The premium investors demand to hold Greek 10-year debt compared with super-safe bonds of Germany fell to the lowest in more than a year.

Greek Financial Market

Greek stocks rise sharply after the elections, with Greece’s Athens Composite Index up 7.2%. The benchmark Athens Stock Exchange General Index jumped to its highest level in almost a decade. The recent election results have put the nation on track to reclaim an investment-grade rating, 13 years after losing it. This is due to strong election support for market-friendly Prime Minister Kyriakos Mitsotakis.

Recently, the S&P revised its assessment of the country's prospects, shifting from a stable outlook to a positive one. According to analysts, Greece's long-awaited investment grade rating could be restored after the parliamentary elections this year, but this would depend on the new government's commitment to continued reform and fiscal responsibility.

Greece, which successfully completed previous bailout programs in 2018, had aimed to regain such ratings and achieve fiscal stability by early 2023, prior to a national election that could introduce political uncertainty.", per a Reuters article.

Greece has been outperforming many of its peers in the Euro zone in terms of economic growth. Additionally, the country’s inflation rate is falling faster than many other European countries. Greece’s current S&P rating is BB+ and current Moody's Investors Service rating is Ba3. The fund GREK is up 20.2% this year and has added 33.8% past year.