Matthew Winkler, Editor-in-Chief Emeritus of Bloomberg News, writes about markets. Read more opinion SHARE THIS ARTICLE Share Tweet Post Email

Photographer: Kostas Tsironis/Bloomberg Photographer: Kostas Tsironis/Bloomberg

Remember last February, when former U.S. Federal Reserve Chairman Alan Greenspan said Greece would leave the euro and that the common currency would collapse? Remember that a month later, investor-philanthropist George Soros said Greece was going down the drain? Or that just this July, the president of the German Institute for Economic Research, Marcel Fratzscher, characterized Greece as a "political and economic catastrophe" that would revert to the drachma in desperation?

QuickTake Greece's Financial Odyssey

Greece isn't out of the financial woods by any means. Yet it's turned out to be a winning investment since the end of 2014, the top debt performer in the euro zone since January and the best of all assets in the world since July. Since the anti-austerity party Syriza was elected, there hasn't been a stock, bond, commodity or currency market that produced anything resembling the return of Greek debt, which earned more than 100 percent in a handful of months, according to data compiled by Bloomberg.

Winners Since July 8

Source: Bloomberg

Greece beat every publicly-traded asset as its bonds increased in value from their lowest point in July to their highest today. Anyone sophisticated enough to buy those Greek bonds while simultaneously shorting, or borrowing the money to sell, the similar-maturing government securities of Dr. Fratzcher's Germany -- the most creditworthy country in the euro zone -- made a big profit on that trade too.

On Jan. 25, Alexis Tsipras swept to power as Greek prime minister with a seemingly contradictory mandate to end five years of reduced government spending while securing the final 7.2 billion euros ($8.1 billion) of 240 billion-euro bailout funds from resistant European Union creditors. Six days later, the interest rate on the benchmark 10-year Greek bond was at a 15-month high of 11.2 percent. Buying that debt then and holding it until today when the yield has fallen to 8.11 percent, driving up the price, would have returned 26 percent.

A few days after Tsipras's victory, Greenspan told the British Broadcasting Corp. that it was "just a matter of time" before Greece abandoned the shared currency of the monetary union and the euro disintegrated. "The problem is that there is no way that I can conceive the euro continuing, unless and until all of the members of the euro zone become politically integrated -- actually even just fiscally integrated won't do it," Greenspan said.

While the outlook improved to the extent that the yield on the benchmark Greek bond had declined to 10.8 percent by March 24, it wasn't enough to convince Soros, the billionaire chairman of Soros Fund Management. "Greece is going down the drain," he said in an interview with Bloomberg Television. "It’s now a lose-lose game and the best that can happen is actually muddling through." Had Soros bought Greek bonds on March 24 and held them until today, his return would have been 21 percent. And anyone who simultaneously bought Greek bonds while shorting German government bonds has a total return of 25 percent.

The climax of pessimism came in the first week of July, after Greeks voted to reject austerity policies prescribed by its international creditors. That's when Dr. Fratzscher, the Oxford- and Harvard-educated former head of policy analysis at the European Central Bank, wrote in his blog, "The referendum translates to a political and economic catastrophe for Greece." He also made this prediction: "A Grexit is and remains the worst option for Greece. It is becoming more and more likely."

Investors didn't see it that way. Their enthusiasm for Greek debt reflected in its rising value was a vote of confidence in Greece's future -- and also in the creditors' prescription of harsh austerity medicine as treatment for Greece's economic ills.

Had anyone rejected Dr. Fratzscher's perspective and bought Greek bonds yielding 19.2 percent when he made this prediction and held them until today, his return would have been 101 percent. That means an investment of $100 million on July 8 would have been worth $201 million within two months. Over the same period, the benchmark for all European bonds returned little more than 1 percent. An investment in the same European benchmark since March 24 lost 3.3 percent, according to data compiled by Bloomberg. And while the buyer of Greek debt since Jan. 31 has a 26 percent return today, the European benchmark lost 1.8 percent during the same period.

Since July 8, nothing in the world from stocks to bonds to commodities to currencies earned anything close to the return of Greek bonds. Throughout 2015 there were two things that never changed. Polls showed that Greek citizens consistently preferred the stability of Europe's monetary union to the instability of drachmas. Similarly, no European head of state ever said the EU wanted Greece to leave the euro zone. The euro, which both sides declared their currency of choice, wound up being the instrument that made investors in Greek bonds the winners of 2015.

(With assistance from Shin Pei)

(Corrects title of former Greek Prime Minister Alexis Tsipras in 4th paragraph.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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Matthew Winkler at mwinkler@bloomberg.net

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Jonathan I Landman at jlandman4@bloomberg.net