Greek sovereign bond yields and their spreads endured a significant increase on Friday, standing out among other eurozone bonds that also took pressure, albeit to a considerably smaller degree.
The yield of Greece’s benchmark 10-year bond soared by 7% to 1.51 percentage points, the highest since May 2020, while the spread with the German 10-year bund grew to 159 basis points. The five-year bond recorded a 9% rise to its yield, reaching 0.709%, the 15-year yield rose 4% to advance to 1.595 percentage points, and 30-year paper saw its yield swell 6% to 1.343%, all of them on a 20-month high too.
According to market observers, Greek bonds were on Friday in traders’ focus due to expectations about a new market foray by Athens as early as next week, and ahead of the new credit rating report on Greece by Fitch Ratings expected next Friday.
Confusion about the maturity of the new issue and the possibility of it being longer than 10 years has put additional pressure on the long end of the yield curve.
Notably, Societe Generale estimates Greece will tap the markets this month with a new 15-year or even 20-year bond, while Citigroup, Danske Bank and JPMorgan anticipate a 10-year debt issue.
Another reason behind the pressure on Greek bonds was the sell-off international bond markets recorded on Thursday, partly due to the soaring yield of the 10-year US bond to a 10-month high, above 1.7 percentage points. However, Greece was lucky to escape that sell-off thanks to its Epiphany holiday, to experience milder pressure on Friday, with some delay.
The market estimates that Greek securities are in the process of coming off a December rally, complete with a spread reduction, created by the European Central Bank’s decision to incorporate Greece in its bond reinvestment program; the positive impact of the decision appears now to be wearing off.
On Tuesday, the Public Debt Management Agency issued new 13-week treasury bills for 625 million euros that secured a coverage ratio of 1.84 and led to eventually drawing €812.5 million, at a negative rate of 0.40%. That compared with a 1.69 coverage ratio and a -0.43% interest rate recorded in the previous such auction, on November 3.