Greece ETF Soars Then Falls On Tentative Deal

Greece cut a tentative deal overnight for yet another bailout package that would prevent the country’s exit from the eurozone, at least for now.

The last-ditch effort, which has yet to be ratified by the Greek parliament later this week, sent the Global X FTSE Greece 20 ETF (GREK | D-63) soaring upward of 10 percent this morning. However the fund quickly lost those gains and was down 5 percent mid-morning. Since the agreed-upon terms are harsher than what the country rejected in the recent referendum, it's unclear how the parliament will vote.

Some are calling the deal a capitulation, considering that just a week ago Greek voters said “no” to more austerity measures. What’s perhaps surprising about this deal is that the Greek government and EU leaders agreed on austerity measures and fiscal reforms that are “even stricter than those rejected by the country’s voters,” according to MarketWatch.

If Greece enacts all the measures and reforms, it will get as much as $96 billion in fresh bailout aid.

Can Greece Deliver?

Greece was once at the epicenter of the eurozone’s debt crisis following the U.S. credit collapse back in 2008. It’s now back in that position. Whether Greece can deliver on the terms of the deal is a big “if,” but for now, markets welcomed the news as a reprieve from uncertainty and volatility surrounding the future of Greece, the eurozone and ultimately the euro.

U.S. stocks were up more than 1 percent at the opening bell, and 10-year Treasury yields soared more than 6.4 percent to 2.45 percent early as demand for safety softened. (As bond prices drop, yields generally rise.)

GREK, the only U.S.-listed ETF to offer focused exposure to Greek equities, has been struggling to find much upside throughout this year. In fact, late last month, the fund dipped to its lowest levels since early 2012.

Still, investors keep buying dips. Year-to-date, more than $284 million in fresh net assets have flowed into this fund, which has only $300 million in total assets. GREK’s portfolio tracks a market-cap-weighted index of the largest Greek names. 

Chart courtesy of StockCharts.com