GDP warrant rate backs up growth hopes

By Ilias Bellos

A largely forgotten Greek financial derivative has risen by up to 475 percent since June 2012, becoming a leading measure of growing confidence in the local economy.

The Greek gross domestic product warrants, issued in the context of the PSI+ bond swap program in early 2012, have seen their transaction activity in the secondary market grow in recent months, with their price recording one historic high after another.

Greece’s return to the international bond market and the recent announcement of unconventional measures to relax monetary policy by the European Central Bank have contributed greatly to the rekindling of buying interest for a product that foreign rating agencies consider the clearest way investors to bet on Greek recovery.

Since the start of 2014 the price of the GDP warrant has soared by 25 percent, while transaction activity has also approached historic highs. This is also explained by the record high of Greek bond prices. GDP warrant prices stood late last week at 1.44 euros per 1-euro warrant, compared with just 0.25 euros on the eve of the 2012 general elections.