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Voracious appetite for Greek bonds justified?

Greece's return to the long term bond market for the first time in four years met huge demand, but some experts warned that the nation's debt still remains highly risky.

Greece, the country once held responsible for sparking the sovereign debt crisis, managed to attract 20 billion euros ($27.7 billion) of offers for a new five-year bond and is set to sell 3 billion euros at a yield of 4.95 percent.

Read MoreGreece offers first long-term bond since 2010

Chris Ratcliffe | Bloomberg | Getty Images

Bond investors are heralding the offer as an important milestone and further boost for the euro zone recovery, with the sub 5 percent yield a significant psychological marker.

"It is hugely significant I think, because it is Greece. Greece is the country that started the whole sovereign debt crisis and (also) because it defaulted," said Don Smith, government bond strategist at ICAP, who said the ongoing hunt for yield also played a part in the success of the offer.

"To have a 4 percent handle on that coupon, is psychologically very important," he said.

The International Monetary Fund's Managing Director Christine Lagarde agreed, saying the "great appetite" was a sign of trust and confidence in the country's economic recovery.

"I think it's an encouragement also for the Greek people who have put up with a lot of hardship, and the authorities that have driven the effort," she told CNBC's "Squawk on the Street" on Thursday. "It's not over, but it's a clear indication that the direction is good."

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Global head of rates for JPMorgan Asset Management, David Tan said the well-received offering was "symptomatic" of the persistent bid for euro zone peripheral sovereign bonds since the start of the year.

The market also expects additional monetary easing from the European Central Bank later this year, particularly if inflation remains stubbornly low, which was another encouraging factor for Greek bond buyers, Tan said.

That said, Markus Allenspach, head of fixed income at Julius Baer said the yield looked "mean" given the low sub investment grade B- sovereign rating. Others said while the offering was positive for the long term prospects for the euro and peripheral debt, investing in Greek sovereign debt was still too risky.

Head of bonds and currencies at Kleinwort Benson, Fadi Zaher said he was not looking to snap up Greek debt any time soon, as outstanding debt levels in Greece are still high despite debt restructuring two years ago.

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"The excitement over peripheral Europe could not offer a better timing for the Greek government's decision to tap the market. That said we are not going to buy Greek debt on a risk-reward basis," he said.

Smith said the risk factor is still "very much there in the 5-year sector" which explains why the difference in yields between 5 year and 10 year Greek bonds is so limited compared to other peripheral markets. Greek 10-year bonds currently yield 5.9 percent. That compares with a yield of 3.9 percent for Portuguese 10-year bonds and 2.7 percent for U.S. 10-year Treasurys. Five-year Treasury notes currently yield 1.6 percent.

"We are not that far from the sovereign debt crisis. The question marks about the longer term success of the euro haven't gone away completely," he said.

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