Greece is celebrating. Is there a reason?

Cheer loudly and celebrate for three days! Believe it or not, Greece really issued its government bonds for the first time in three years. The fact that Greece, burdened with bankruptcy, has returned back to the financial markets has been giving strength to the European stocks past hours and days.

However, from my point of view, there is not much to celebrate. Issuing of five-year Greek bond in the volume of three billion euros with a yield of 4.625 % is still expensive. The Czech government bonds with more than twice longer 10-year to maturity are carrying a yield under 1 %. But Greece together with the entire Europe is despite that rejoicing that Greek bankruptcy is forgotten.

I don’t want to be a bad prophet but I think that it is not definite. Greece is still relying on foreign help. We could have read a couple of weeks ago that Greece can draw another part of the loan from the third rescue programme in the sum of 8.5 billion EUR. All of that while considering that the Greek government debt is still making fewer than 180 % GDP. On top of that, its size hasn’t been dropping past years but is roughly stagnating.

The European central bank might start limiting the buyout of the government bonds already in autumn. That means that it is going to partly leave the line on buying the debts of individual countries. And that is going to mean that the yields of the government bonds of the European countries are going to go gradually upwards sooner or later. And if the yields in countries such as the Netherlands or France are going to grow then the yields of Greek government bonds can be rising twice as fast.

As a Europe, we are going to worry again...

The economic world is synchronising

It seems that the global economy is going through an interesting twist of events. We have been observing for years how after the crisis in the years 2008 and 2009, the world split apart. Asia barely noticed the crisis, America recovered soon but Europe couldn’t recover for a long time.

Only when it seemed that something is sort of getting better the bankruptcy of Greece hit and then the infection of Cyprus and others.

But now something is starting to change. Apart from some exceptions, Europe is also growing. Suddenly almost the entire world is growing.

That is getting confirmed by numbers that has been published today from Germany where the exports grow significantly faster than it was expected. It seems that the German economy is going to grow this year beyond all estimations. The growth of the German export is so fast that even the MFF is warning about it and suggesting Germany to increase the domestic investments so the German imports would grow and Germany wouldn’t be generating such a high trade surplus.

Everybody is afraid that if Germany has big surplus somebody else has to have a deficit which is creating an imbalance on the planet and potential problems to the future. That’s why many people are betting on the interest rates growing soon in Europe. But people are betting on the same thing in America as well anyway.

The Canadian central bank could start the global winding down of the monetary policy this week already. It is justifiably fearing that the average Canadian is indebted too much because of the all-time low interest rates. The debt of Canadian households has doubled in comparison with the year 2009. To keep the interest rates all-time low is dangerous. It could lead to the households getting overly indebted. But raising the interest rates is also dangerous because many people won’t suddenly have money for payments and it is going to start a recession and a rise of bankruptcies. That’s why the raising of the interest rates needs to be gradual.

That is changing the situation on the financial markets. Bond yields are going up all over the planet. The outlook of the dollar is not as good and clear as it used to be. On top of that, many people expected great things and changes of D. Trump. He hasn’t changed much in the economic area so far which might cause disappointment. That’s why we are expecting stagnation to a slight depreciation of the dollar for the majority of following month. The dollar is going to stay most of the time in the interval from 1.12 to 1.16 USD/EUR.