Bond yields drop to year’s low

Kathimerini English - - Focus -

Greek two-year gov­ern­ment bond yields fell to their low­est level this year yes­ter­day as in­vestors wel­comed Athens’s ap­proval of a se­ries of re­forms needed to un­lock bailout cash. Par­lia­men­tary ap­proval of the re­form bill late on Fri­day keeps Greece on track to se­cure the next 2-bil­lion-euro in­stall­ment of its aid pro­gram as well as funds to re­cap­i­tal­ize its ail­ing banks and ne­go­ti­a­tions on debt re­lief. It was also seen as a demon­stra­tion of strength by Prime Min­is­ter Alexis Tsipras, who held on to power in an elec­tion last month de­spite a split within his party. “In­vestors are sim­ply di­gest­ing the vote... on the so-called pre­con­di­tions for the third bailout pack­age,” said Chris­tian Lenk, rate strate­gist at DZ Bank. “There is some re­lief that Tsipras finds enough sup­port among his ranks to pass th­ese re­forms.” Mis­sion chiefs of Greece’s in­ter­na­tional lenders will visit to­day to be in­formed about the pace of re­forms, a Greek gov­ern­ment of­fi­cial said yes­ter­day. The first re­view of Greece’s 86bil­lion-euro bailout is due to start later this month. Greek debt was the best per­form­ing in the eu­ro­zone yes­ter­day, with twoyear yields down more than 80 ba­sis points at a 2015 low of 8.23 per­cent, ac­cord­ing to Tradeweb. The gap be­tween Greek and Ger­man two-year yields was also at its nar­row­est this year. Short-dated yields re­main higher than those on longer-term bonds, how­ever, in a sign that in­vestors still fear the coun­try could be head­ing to­ward de­fault. Ten-year yields were down 27 bps to 7.63 per­cent. Owen Cal­lan, a se­nior an­a­lyst at Can­tor Fitzger­ald, expects this dis­tor­tion to fade once Athens passes the re­view, which he said should in turn prompt the Euro­pean Cen­tral Bank to start buy­ing Greek bonds un­der its quan­ti­ta­tive eas­ing scheme.

Sugar fac­tory. The Hel­lenic Sugar Industry is plan­ning to ta­ble its new busi­ness plan – drafted by Euro­con­sul­tants – to cred­i­tor Pi­raeus Bank by this Fri­day, while the sugar fac­tory at Ores­ti­ada, north­east­ern Greece, is set to re­open to­mor­row. If the bank ac­cepts the plan it will re­fi­nance the industry.

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