Remember back when Greece was the laughingstock of Europe with its seemingly non-stop economic, political, and debt problems? They aren’t laughing as much anymore. Just yesterday, S&P raised its rating on Greek long-term debt, and while the current rating of B+ is still pretty far down the ladder in terms of quality, it’s moving in the right direction. As things currently stand, Greek 10-year debt sports a yield of 4.11%, which is down more than a full percentage point in the last year.
At the same time that yields on Greek debt have been falling, yields on Italian debt have been rising. In Italy, yields on 10-year debt are at 2.89%. While that’s right around the same yield as the US 10-year, relative to most other of its EU peers, Italian debt yields are up sharply over the last year as well as the last three months. As a result of the opposite moves in the yields of Greek and Italian 10-year debt, the spread between the two has narrowed considerably. Through Tuesday, yields on 10-year Greek debt offer a premium of just 122 basis points over Italian debt, which is the narrowest spread since December 2009. We’ll let you decide what this says about the relative attractiveness of either country’s debt.