A European Central Bank decision on Friday to make EFSF bonds - used to recapitalize Greek banks under the most recent Greek bailout program - eligible for purchase under its QE plan generated a windfall of one billion euros as well as a needed “morale booster” for Greek lenders.
Although the move isn’t, officially, related to ongoing negotiations between Athens and institutional creditors to achieve a first review of the Greek program, the decision nevertheless demonstrates the ECB and Mario Draghi’s intent to boost Athens’ financial position.
Greek banks retain 37 billion euros worth of EFSF notes, which they had received as part of the first recapitalization and from retaining the “good parts” of other liquidated banks. Previously, they were unable to sell the notes and were obliged to value them at 100 percent of face value.
The unexpected fillip led to a rally by the Athens Stock Exchange on Friday, with bank shares leading the way. According to Bloomberg, Greek banks led European equities.
The ASE index added 3.9 percent at its closing session during the week, while Greece’s 10-year bond yield fell 21 basis points to 9.13 percent.
