Greek bailout wins two cheers from wary investors

By Mark Gilbert

Greece?s bailout reinforces a rally that has driven yields for Italy and Spain down from euro-era records, giving the region?s leaders time to convince investors they can deliver both economic growth and spending discipline.

?It is good to have cleared the Greek Damocles sword for a few months,? said Raphael Gallardo, the head of economic research at Axa Investment Managers in Paris, which oversees about 515 billion euros ($680 billion). ?The euro area governments and European Central Bank have won some time, two months at least. It is positive for risk assets in the short run.?

Italy?s average 10-year borrowing cost has dropped to below 5.4 percent this year from 7.1 percent at the end of December.Spain?s 10-year yield is 5.08 percent, down from more than 6.7 percent in mid-November and compared with its 2011 average of 5.4 percent.

Greece?s government has to convince its lenders it can enforce the spending cuts that won it 130 billion euros of aid, its second rescue in three years. French President Nicolas Sarkozy faces an election, while Italian Prime Minister Mario Monti has to persuade lawmakers to back labor market reforms.

?The deal may have removed near-term uncertainty, it won?t immediately change our investment view,? said Helen Roberts, who oversees 27 billion pounds ($43 billion) as head of government bonds at F