Yields on Greece's new five-year bonds, sold in the bailed-out country's return to markets after a four-year absence, were expected to fall below the sale price when they began trading on Friday.
Banks managing the sale said the bonds had already begun trading over-the-counter at yields below the 4.95 percent at which they were sold, although market participants were reserving their verdict on the deal until prices appeared on trading screens. That is expected to take place on Friday but depends on when the bonds are released to those who bought them.
Athens sold 3 billion euros of five-year bonds on Thursday, receiving massive oversubscription for its first sale of a new bond since before its bailout in 2010.
Some brokers were marking the new five-year bonds 15 basis points below the 4.95 percent yield at which it was sold, indicating the bonds would rally once secondary market trade began. Yields fall as the price of bonds rise.
One bank managing the deal said the bonds were trading at 4.90 percent. Nevertheless, brokers said there was little evidence of follow-on interest in the five-year bonds.
David Schnautz, a credit strategist at Commerzbank, said the 20 billion euros of orders for the new bonds was not a true reflection of demand, as investors were prone to inflate their orders to make sure they received a decent allocation.
"(As an investor) you have to shoot very high to get what you actually want,» he said.
The Greek finance ministry said on Thursday a third of the bonds were allocated to hedge funds, investors notorious for having short-term trading strategies, leading some market participants to question why this was the case if demand was so high.
Demand for Greece's existing 10-year bonds was soft, with yields rising 6.5 basis points to 6.04 percent on Friday. Irish, Spanish and Italian equivalents all rose 1 bps to 2.92, 3.18 and 3.19 percent respectively.
Portuguese 10-year yields were unchanged on the day at 3.9 percent, refusing to rally even though Fitch raised the outlook on its BB+ rating to positive from negative, citing progress in it reducing its budget deficit.
Core eurozone government bonds also lagged on Friday, taking no impetus from a fall in overnight share prices and talk about the potential of asset purchases from the European Central Bank.
Bund futures fell even though stocks suffered a brutal session led by the worst single-day drop in the U.S. Nasdaq since late 2011.
They were last down 10 ticks at 143.79, having nudged over 144 on Thursday on expectations that a rate hike by the U.S. Federal Reserve might not come as soon as some had feared.
"Investors have already seen Bund futures rising to contract highs in the last session, and there is not much upside,» said Christian Lenk, a credit strategist at DZ Bank.