The yield of a bond is not just an economic quantity. It is a gauge that allows one to draw conclusions on various levels.
One conclusion from the rise of the yield of the Greek 10-year bond is that the markets are nervous. The country’s economic situation stirs insecurity in investors, and that is reflected in their actions.
Unfortunately, the markets’ antennae are sensitive to political messages from various players.
Most recently, the messages are not particularly comforting. The tug-of-war between Berlin and the IMF intensifies the uncertainty, while the political situation in Italy – from the prospect of an inability to govern to the prospect of a government comprised of two populist and anti-European parties – may put the EU in general, and the eurozone in particular, in an exceptionally difficult position.
The Greek government also sends signals, and they are exactly the opposite of what is called for at this international juncture, and when the bailout programme is nearing its end.
For reasons one can easily imagine, the government wants to demonstrate that the economy is ready to stand on its own feet, and that it needs no crutches. It insists on this narrative, even though it does not persuade Greek citizens.
Even worse for the government, it does not seem to be persuading those from whom it will seek loans after the bailout exit – the markets.