The yield on the first bond Greece has sold since its 2012 default dipped just below its issuance level on Thursday, as Athens rejoined a rally in peripheral debt markets after a brief period of selling pressure.
The five-year bond, which drew demand almost seven times its size a week ago, faced a tough market debut as investors used the landmark sale as an opportunity to book profits on the euro zone’s best performing bonds this year.
The immediate selling pressure after one of the fastest market comebacks ever from default by a sovereign raised worries that Athens’ access to private funding remained at the mercy of come-and-go hedge funds.
The dip back to just below the 4.95 percent issuance yield from levels above 5.1 percent it hit earlier this week suggested Greece might after all be able to count on a more stable investor base in the future.
A strong market performance of the bond was key to attracting investors to any future Greek bond sales.
“Probably there were a couple of guys on board who expected to have a quick gain and got out … maybe a bit too early,” said Padhraic Garvey, head of investment grade debt strategy at ING in Amsterdam.
“Ideally you want this bond to trade 4.75 or even 4.5 percent to build confidence. You don’t want the yield to go up because it leaves a bad taste in the mouth and reduces the chances of success for other deals.”
Garvey said the yield dipped in line with moves in other lower-rated eurozone bond markets.
Yields on Italian, Spanish, Portuguese and Irish bonds traded close to multi-year or even record lows on Friday as the possibility that the European Central Bank may eventually have to fight low inflation with asset purchases increasingly outmuscled any other market drivers for peripheral debt.
Greek 10-year yields last traded at 6.21 percent, having risen from four-year lows of 5.85 percent to just below 6.50 percent in the days after Thursday’s bond sale.
The new five-year bond traded at 4.949 percent.
“The rally in peripheral bond markets continued unabated this week and I don’t see why Greece should go against the tide,” said Mathias van der Jeugt, a strategist at KBC. [Reuters]