An estimated €5 billion of inflows are estimated to have taken place in Greek government shares and bonds as a result of the credit upgrade of the Greek economy.

According to a study published in the latest Bank of Greece Financial Bulletin, from Q2 2022 to Q3 2023, the increase in bond and equity placements is estimated at €5 billion, of which €2.9 billion are equity positions and €2.1 billion are bond positions.

As noted in the study signed by Charilaos Giannakidis, Louis Karathanos, Athanasios Kontinopoulos, Athanasios Lambousis, and Petros Migiakis, "the upgrades of the Greek economy's credit ratings and, in particular, the prospect of an upgrade to the investment grade category have led to a significant increase in investment fund placements in Greek government bonds.".

The study examines whether the increases in investment fund allocations to Greek bonds have outpaced the general market trend and assesses the impact of increased demand on Greek government bond yields. The findings suggest that the change in the outlook of the sovereign credit rating of the Greek economy to positive by Standard & Poor's in April 2023 led to a significant increase in investment fund positions in Greek government bonds relative to other euro area government bonds. This development is estimated to have led to a decline in Greek government bond yields, corresponding to around 80% of the decline in yield spreads against German benchmark bonds.

These results are noteworthy for two reasons. On the one hand, the increase in demand for Greek securities occurred at a time when investment funds were reducing their positions in bonds with low credit ratings.

On the other hand, the decline in Greek government bond yields, largely explained by the increase in the positions of international investment funds, outweighed the upward pressure on bonds internationally due to interest rate increases. Consequently, the findings of the study underline the importance of the upgrade of the sovereign credit rating of the Greek economy in the investment grade, as, among other things, it brings about an increase in the demand for Greek government bonds and, as a result, a significant improvement in the cost of borrowing for the Greek government.