Wednesday Jul 23, 2014 Search
Weather | Athens
31o C
23o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Greek bond yields rise as market comeback euphoria fades

By John Geddie & Marius Zaharia

Greek bond yields rose on Friday as investors booked profits on the rally that preceded Greece's return to debt markets, with even its sought-after new five-year bond succumbing to selling pressure.

Athens, which had been locked out of capital markets for four years and was bailed out to the tune of 240 billion euros ($333 billion) as its economy faltered, received bids seven times the amount in its first sale of a new bond since before its bailout in 2010.

The transaction had buoyed other euro zone government bond markets on Thursday, but the new bonds faced a difficult birth as trading started on Friday, with investors losing their stomach for riskier assets.

"The euphoria is fading after yesterday's deal,» said Owen Callan, a senior analyst at Danske Bank.

"People are taking stock of the fact (that) while its great that Greece regained some sort of access, there is still a very long road to recovery for Greece."

Yields on the new Greek bond traded above 5 percent on Friday, compared with the 4.95 percent level at which it was issued. It had traded at lower yield levels earlier in the day, but that prompted immediate profit taking from Thursday's buyers. Yields rise as the value of the bond falls.

Although its economy looks to have turned a corner, Greece is still seen by many as a weak link within the euro zone.

The government holds only a two-seat majority in parliament, and early elections are a constant risk, with the anti

bailout Syriza party leading in opinion polls.

Many investors still fear social unrest as unemployment, though falling, remains more than twice the euro zone average

at almost 27 percent. On Thursday, a car bomb exploded outside the central bank.

Also, Greece's debts are still 1.7 times its economic output. The International Monetary Fund said Greece was likely

to need more financing help from the euro zone in the next two year despite its market comeback.

"The government ... is fragile, and if the economic recovery falters then this fragility could play out even further,» said

Thede Ruest, a portfolio manager at ING asset management.

Yields on older Greek bonds jumped, with the 10-year yield rising more than a third of a percentage point to 6.32

percent.

In the run-up to the sale, Greek 10-year yields had fallen to four-year lows below 6 percent.

"It's quite obvious that many of the guys that bought the bond were not the buy-and-hold type. They were just fast

money,» one trader said.

At their peaks following a March 2012 restructuring that imposed losses on private debt holders, Greek bonds yielded

above 30 percent.

Other euro zone bond yields rose as well on Friday, while global stock markets tumbled. Given the bigger picture, some

market participants said the new Greek bonds were doing well to sell off less than their longer-dated peers.

"The general market tone is weaker today, but even with that, the new bonds are holding up,» said Andrew Salvoni at

Morgan Stanley, one of the bankers managing the syndicated sale.

Athens received 20 billion euros of orders for its 3 billion bond sale. Demand was equal to about two thirds of the size

of its entire bond market and the volume of more than 100 days of Greek bond trading on electronic platforms.

The surprisingly hefty demand led brokers to mark the new five-year bonds at around 4.8 percent yield before the deal priced on Thursday, expecting the bonds to rally considerably once secondary market trade began. Friday's moves caught them on the wrong foot.

David Schnautz, a strategist at Commerzbank, said the vast orders for the new bonds were not a true reflection of demand, as investors were prone to inflate their orders to make sure they received a decent allocation.

"The ... demand that the bond attracted yesterday is no longer there today,» said Lena Komileva, managing director at G+Economics. «It remains the case that Greece is a troubled borrower struggling to attract genuine investor interest." Some analysts said the final pricing was too aggressive, which was part of the reason Greek bonds sold off on Friday.

"It priced at least 25 bps below initial expectations. They took advantage of the big order book and probably they revised the pricing too much,» said Alessandro Giansanti, senior rate strategist at ING.

"Some investors are (selling) thinking it came at levels that were too tight."

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 in the market to question the wisdom of that high allocation, given such robust demand.

[Reuters]

ekathimerini.com , Friday April 11, 2014 (20:48)  
EU clears National Bank of Greece´s restructuring plan
Greek economy to grow 0.7 percent this year, IOBE says [Update]
Greek economy expected to grow 0.7 pct in 2014, IOBE think tank says
Structural reforms preferable to wage cuts, IMF experts say
EU praises Greece’s progress in departure from troika criticism
Overhauls in Greek markets, the economy and public administration are delivering results, the European Commission said Wednesday, signaling divisions among official creditors over the countr...
KKE chief slams Israel´s Gaza offensive
Communist Party (KKE) chief Dimitris Koutsoumbas has accused Israel of engaging in “genocide” against Palestinians as Tel Aviv's offensive in Gaza Strip continued. “Despite the problems faci...
Inside News
TRACK & FIELD
Athens, the Marathon capital of the world for good
Paco Borao, the man who restored Athens as the Marathon capital of the world with the establishment at the Olympic Sports Center of the headquarters of the International Association of Marat...
TRACK & FIELD
Pole vault record on same day as three doping cases
Greek track and field had a mixed weekend, as on the same day as Katerina Stefanidi matched the national record in pole vault as well as the leading result in Europe so far this season, thre...
Inside Sports
COMMENTARY
Front-line threats
Ongoing developments in the country’s broader neighborhood are creating new challenges as well as threats in terms of the country’s interests. While the Middle East is turning into a big bla...
EDITORIAL
Testing behavior
No country is capable of functioning properly without having an elementary evaluation system in place to assess its public sector employees. In Greece, a country where the lowest common deno...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. EU clears National Bank of Greece´s restructuring plan
2. EU praises Greece’s progress in departure from troika criticism
3. KKE chief slams Israel´s Gaza offensive
4. Greek economy to grow 0.7 percent this year, IOBE says [Update]
5. Former SDOE chiefs given more time to prepare their defense
6. Greek economy expected to grow 0.7 pct in 2014, IOBE think tank says
more news
Today
This Week
1. Hedge fund Dromeus turns Greek tragedy to triumph with 160 pct gain
2. Front-line threats
3. Testing behavior
4. Parts of Thessaloniki university campus sealed off as police investigate bomb threat
5. Police release new photos of fugitive Roupa
6. Greek economy expected to grow 0.7 pct in 2014, IOBE think tank says
Today
This Week
1. Ex-Credit Suisse banker taps lesson for Greek rebound
2. The cost of excellence
3. Greece seen in third bailout as bonds not enough, economists say
4. Climber dies in Mount Olympus fall
5. Summer storms cause problems in Thessaloniki, spread across the country
6. Greek banks able to tap investors after stress tests, HFSF Says
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.