Greek bond yields and CDS soaring
The heavy atmosphereon the Greek bond market was severely aggravated yesterday not only by the German Finance Ministry’s statement in favor of the International Monetary Fund’s participation in the Greek program, but also by SYRIZA MP Nikos Xydakis’s reference to a return to the drachma.
The yield on 10-year Greek government bonds was up 41 basis points yesterday at a seven-week high of 8.18 percent, which later eased to 7.94 percent.
Five-year credit default swaps (CDS) – or the cost of insuring Greek government debt against default – rose 5 bps to 1,011 bps, the highest closing level since December 29, according to finan- cial information services company Markit.
This climate has resulted in fresh pressure on local lenders, in terms of both deposits and nonperforming loans, as concerns about the economy are growing by the day, with the second bailout review still unfinished.
Credit sector sources note that a decline in deposit levels that started in mid-January has been accelerating, despite the existing capital controls. This has taken January into negative territory, while many bank customers have been questioning staff about a possible haircut on deposits if there is a bank bail-in.
After a long period of decline, residential property prices in Greece posted their first – albeit marginal – growth in the third quarter of 2016, according to the latest report by the Global Property Guide. The 0.03 percent rise was from Q2, while there was a 0.53 percent drop from the same period in 2015.
SYRIZA deputy Nikos Xydakis generated concern in bond markets with his talk of a drachma return.