Greek government bonds have held up strongly in recent weeks even as a global sell-off has hit bond markets worldwide, according to a review of market conditions. Despite pressure across the eurozone, Greek bonds have kept a stable profile, with spreads that are comparable to, or in some cases better than, those of peripheral countries such as Italy.
The yield on Greece's 10-year bond has not exceeded 4% since the start of the international crisis, in contrast to French and Italian bonds, which have risen further. Maintaining primary budget surpluses, reducing debt and pursuing growth-oriented reforms are key to keeping borrowing costs low and shielding the economy from crises, the Hellenic Parliamentary Budget Office said in a recent study, adding that these factors limit the impact of global turbulence on Greece's economy and its bond market.
Greece's borrowing costs are now consistently lower than those of other eurozone countries, standing 13 basis points, or 0.13 percentage points a year, below Italy's, and 17 basis points, or 0.17 percentage points a year, below France's. That gap allows both the Greek state and Greek companies to borrow more cheaply than their competitors, with knock-on benefits for economic growth.
Global conditions worsen
International financing conditions have deteriorated since the start of 2026, largely because of heightened geopolitical uncertainty linked to the conflict in the Middle East and inflationary pressure from rising global energy prices. Markets revised their expectations for inflation and key interest rates upward, increasing volatility in international bond and equity markets and worsening global financial conditions overall.
Despite that turmoil, the Greek sovereign bond market continued to show significant resilience. Credit rating upgrades, sustained high primary surpluses and falling public debt have all strengthened investor interest in Greek debt. As a result, Greek government bond yields, while following the broader upward trend across Europe, kept a comparatively favourable position, with the increase attributed entirely to spillover effects from international developments. Positive momentum in Greece's sovereign credit ratings has also continued to benefit ratings in the banking sector, helping lower funding costs for Greece's systemic banks and easing their access to international capital markets.
Recent data from the Bank of Greece pointed to strong international demand for Greek assets, with non-resident holdings of Greek bonds and treasury bills rising by 9.1 billion euros, while a further 1.5 billion euros flowed into shares of domestic companies. Several factors could sustain the positive trend in Greek bonds, chief among them a supportive macroeconomic environment and continued fiscal overperformance, which widen the scope for further upgrades to Greece's debt rating.
Credit rating upgrades expected
International rating agencies are backing Greek bonds for 2026 and anticipate further upgrades, though visibility has become less clear following the deterioration in the global geopolitical climate. Greece expects new upgrades to its credit rating from ratings agencies. The Greek economy will be assessed next month by DBRS, Moody's and Scope, with further reviews following in October from Standard & Poor's and in November from Fitch.
Sovereign credit ratings from all agencies accepted under the Eurosystem framework, namely Fitch, Moody's, Morningstar-DBRS, Scope Ratings and S&P, currently sit within investment grade. After a series of upgrades in recent years, S&P, Fitch, Morningstar-DBRS and Scope Ratings all rate Greek sovereign debt at BBB, while Moody's rates it at Baa3, the equivalent of BBB-.
Early debt repayments
The Greek government is also trying to send a further positive signal to markets through its plan to accelerate the reduction of public debt, which is already under way through early repayment of loans that would otherwise have matured between 2033 and 2042. Through this move, the Greek state aims to reassure institutions, rating agencies and, above all, the international investment community that it is acting with foresight, in good time, to further reduce its already-lowered annual gross financing needs beyond 2032.
The total value of early public debt repayments for 2026 is expected to reach about 12.84 billion euros. According to Greece's Ministry of National Economy and Finance, the weighted average maturity of the discounted public debt stands at 7.1 years, with a weighted average servicing cost of about 2.9%. Based on these figures, the annual saving to the Greek state from reduced interest payments is estimated at about 370 million euros, while surplus cash reserves, whose returns fall well short of the average cost of servicing public debt, are also being put to use. Under the same assumptions, the total benefit over seven years is estimated at at least 2.6 billion euros.
Debt set to fall sharply
As a result of this move, Greece will stop being the most heavily indebted country in Europe this year, falling to second place behind Italy, whose debt stands at 137% of GDP. Greek debt is projected to remain on a strongly downward path and fall below 110% of GDP by 2031.
German rating agency Scope Ratings, in a recent report, forecast a substantial decline in Greek debt, estimating it will fall to 107% of GDP by 2031, down from 136% this year and 128% in 2027. That rapid reduction would leave Greece with lower debt by 2031 not only than Italy, which it is expected to overtake already this year, but also than France and Belgium, bringing it close to the eurozone average. Eurozone debt as a whole is expected to stand at 90% of GDP in 2031, the same level as in 2027.
BofA warns on US bonds
With United States national debt approaching 40 trillion dollars, Bank of America has warned bond investors to buy "anything but bonds," and expects the national debt to reach 50 trillion dollars by 2029.
The concern, according to the bank, is not that the government owes a large sum, but that it must continually refinance and issue more debt, creating a greater supply of bonds that investors need to absorb. If investors become less willing to buy that debt at current yields, the government must offer higher interest rates to attract them.
New bonds become more attractive because they offer higher income, but existing bonds lose value when market yields rise. The longer a bond's maturity, the more sensitive its price generally is to changes in interest rates, making long-term bonds especially vulnerable if investors keep demanding higher yields to offset fiscal and inflation risks.
