Greek government bond yields fell for a second day on Tuesday after eurozone finance ministers approved an aid payment that will spare the country from default in August.
Greece outperformed after finance ministers approved a 6.8-billion-euro deal under which Athens will be drip-fed support conditional upon implementation of reforms.
Greek 10-year yields fell 20 basis points to 10.75 percent, having fallen more than 40 bps on Monday on expectations it would secure the aid payments.
“For Greek bonds it’s positive so yields can drop further,” said Mathias van der Jeugt, a strategist at KBC.
He said a gradual fall in 10-year yields to just below 10 percent was possible in coming weeks if eurozone tensions remain subdued.
The Greek yield curve remains inverted, however, with 10-year bonds yielding more than longer-term debt, in a sign of the stress government financing is under.
Morgan Stanley strategists closed their buy recommendation on Greek bonds and shifted their stance to neutral, saying prices may come under pressure from potential political constraints to Athens meeting its bailout conditions against a backdrop of a repricing of risk premium globally.
“Greece still presents attractive medium-term potential value, but strong idiosyncratic drivers are necessary to restore a renewed momentum which would allow Greece to outperform other European peripherals,” they said in a note.