Investors who held nerve with Greece reap world's best bond returns

By David Goodman & Lucy Meakin

Bondholders who held their nerve as Greece sparred with the euro region are now reaping the rewards.

Sticking with Greek securities through the election of the anti-austerity SYRIZA party a month ago -- and the turmoil of ensuing funding negotiations -- handed investors the best returns globally this year, according to Bloomberg indexes of sovereign bonds.

Traders of Greek debt were relatively sanguine as they braved heightened volatility and warnings from strategists that the nation risked an exit from the currency bloc. Their resilience kept the 10-year yield below its five-year average throughout the upheaval, and by Tuesday, when euro-area finance chiefs approved an extension of financial aid, it was more than a percentage point lower than its Dec. 31 close.

?You would have bought these bonds knowing the political risk could rise with SYRIZA ahead in the opinion polls, thus have a reasonably high tolerance,? said Orlando Green, a fixed-income strategist at Credit Agricole SA?s corporate and investment banking unit in London. ?There isn?t a lot of trading so you really have to buy and hold.?

The Bloomberg Greece Sovereign Bond Index returned 11 percent this year through Tuesday, the most among 31 gauges of government debt. It beat a 4 percent profit for Portuguese securities and a gain of 3.5 percent on Italy?s. The index, a market-value weighted measure of Greek bonds, was at 100.80, which is 38 percent higher than its five-year average.

Bondholder reassurance

Almost immediately after SYRIZA won power with its pledge to scale back Greece?s economy drive, new Finance Minister Yanis Varoufakis traveled to London to address about 100 financiers, telling them he didn?t plan a debt...