Greece has been one of the most controversial international investing stories of the past decade, after its underreported finances spurred the European Sovereign Debt Crisis. The country still hasn't fully recovered from its decline, while the eurozone faces issues of its own with even larger economies. But aside from these dynamics, Greek bonds have proven to be a very interesting security for international investors to watch.

Greek Bonds in the Crisis

Greece was shut out of the international capital markets back in 2010 and has relied on help from the European Union ("EU") and International Monetary Fund ("IMF") in order to avoid bankruptcy. Of course, these funds came with many strings attached and the Greek government was forced to undergo a number of reforms and fiscal consolidation programs in order to reduce its debt load and create a more sustainable path for the future.

As the country moves closer to a budget surplus (excluding interest payments) and growth in 2013 and 2014, many investors are eagerly awaiting its return to the bond market. The country's leaders are also urging eurozone regulators to consider a common debt market and banking union in order to strengthen its financial strength and help lower Greece's eventual interest rates, although these moves seem unlikely in the near-term.

Greek Bond Prices & Yields

Greek 10-year bond yields remain high and prices remain low, given that the country is still in its sixth year of recession and dependent on bailout funds to avoid bankruptcy.

Bond yields rose from a low of 3.2% in June of 2005 to a high of 48.6% in March of 2012 during the height of the European Sovereign Debt Crisis. Since then, Greek bond yields have fallen to around 10%, where they have remained throughout the first half of 2013.

And, some investors see opportunity in Greek bonds at these levels. In July of 2013, U.S.-based investment company Japonica Partners offered to buy 4 billion euros (US$5.31 billion) of the country's debt at 40 cents on the euro. According to many experts, the fund has been unable to accumulate a large position, as many owners of Greek bonds are looking for around 55 to 60 cents on the euro, with prices trading higher and lower than the offer in the interim.

Greek Bond Credit Ratings

Greek bonds have been steadily improving over the past few quarters in terms of their credit rating by major ratings agencies. In May 2013, Fitch upgraded Greece by one notch from CCC to B-, citing progress in cutting its budget deficit and reduced risk of leaving the eurozone. The remaining problems are associated with the unpopularity of austerity measures being pushed by the government and the recessionary impact of those measures on the economy.

At the same time, Standard & Poor's raised their rating to B- with a stable outlook from selective default in December, while Moody's maintained its C rating on the credit. These moves helped reduce borrowing costs to their lowest levels since early 2011 in a sale of 1.3 billion euros worth of government Treasury Bills during that month. Finally, the IMF has been quick to commend the country for its "exceptional" progress in improving its finances.

Takeaway Points

• Greek bonds have been the subject of much scrutiny over the past few years, after the country arguably caused a cascade leading to the European Sovereign Debt Crisis.
• The low prices and high yields of Greek bonds have attracted some investors that have taken a position in the market and realized significant gains over the past couple years.
• Many ratings agencies remain bearish on the bonds - with "junk" ratings - but they have been slowly warming up to the country's slow recovery.