Greece is emerging as one of JP Morgan’s top investment choices for the medium term, with the US House actively recommending positions in Greek bonds. In its new analysis of the bond markets, the US bank describes Greece as a “top overweight pick”, thanks to strong macroeconomic and fiscal fundamentals and the stability of the political landscape.

According to JP Morgan, Greece has underperformed against peripheral bonds in recent weeks, particularly in the 10-year. As a result, Greek bonds appear “cheap” relative to their historical valuations, especially against Spain. As reflected in the report, the relative valuation of Greece and Spain is diverging from fundamentals, which creates a clear investment opportunity. JP Morgan recommends a long position in the 10-year Greek bond versus the Spanish bond, with relative value (RV) and a “moderate risk-on flavor”. This strategy is also reinforced by the fact that the trade offers a positive rollover yield of around 0.5 basis points per quarter, providing additional incentive for institutional investors.