DZ Bank

For rating agencies and major analysts, the story of Greece's debt regaining its investment grade after 13 years is one of the most compelling.

The European Central Bank has acquired 4.69 billion euros of Greek bonds since it launched its emergency bond-buying program in late March to support the eurozone in the face of the coronavirus pandemic.

Greece's benchmark 10-year government bond yields dropped to their lowest since 2006 on Monday after Moody's raised its rating late last week, bolstering investor optimism towards the eurozone's most indebted country.

Moody's on Friday lifted Greece's issuer ratings to B1 from B3, citing the effectiveness of the country's reform program.

The rally in Greek bond prices that followed last week's issue of a five-year note came to an end on Monday.

Analysts note that while the strong demand for the issue has led the government to start planning for its next market foray, the current favorable climate will be hard to sustain, as Greece remains "a special case."

Short-dated Greek bond yields hit record lows in Tuesday's trading.

Two and five-year bonds yields in Greece, which received its first ratings upgrade from Standard & Poor's in two years on Friday, hit record lows at 1.21 percent and 2.73 percent respectively.

Investors have piled into Southern European debt recently. Italian, Spanish, Portuguese and Greek borrowing costs have all fallen sharply over the past month as bond markets priced down political risk in the eurozone.

Greek government bond yields dipped early on Monday after Fitch became the second ratings agency to upgrade it to "Single B" status, marking another milestone in the debt-laden state's slow journey away from default territory.

Investors started focusing on the positives in the eurozone on Friday, particularly after European Central Bank chief Mario Draghi's optimistic comments the day before.

"Everything has turned upside down - European political risks have faded, the economy is looking strong, while in the US everybody is worried," said DZ Bank strategist Daniel Lenz.

Greek government borrowing costs hit their lowest since late 2014 on Tuesday after its government announced that it had agreed a deal on bailout reforms, paving the way for a disbursement of rescue funds.

Greek government bond yields tumbled to multi-week lows on Wednesday after Reuters reported that Greece had reached an agreement with its lenders on some of the main issues in the indebted country's current bailout talks.

Short-dated Greek bond yields fell to a two-month low of 7.47 percent and were last down 50 basis points.