Greek bonds extend selloff, pushing yield up most in 15 months

Greece’s 10-year bonds fell a third day, pushing the yield up by the most in more than 15 months, on concern the government’s plan to end its bailout early will leave the nation unable to raise funding sustainably.

The rate on 10-year securities reached a seven-month high after Alternate Finance Minister Christos Staikouras on Tuesday reiterated the country’s intention to raise cash by selling seven-year notes. Greece’s 10-year yields have climbed for five successive weeks amid speculation the government’s plans to hold onto power by ending an international bailout will lead the nation away from austerity plans designed to control the debt and deficit.

“The main factor that is pushing Greek yields higher is the uncertainty or their plan to exit the bailout early, and the market clearly isn’t cheering for that,” said Jan von Gerich, a fixed-income analyst at Nordea Bank AB in Helsinki. “It’s clear that they are not ready to make it on their own yet. If they need to finance themselves from markets in large volumes that is not going to work with current yields.”

Greece’s 10-year yield increased 57 basis points, or 0.57 percentage point, to 7.58 percent at 11:53 a.m. London time. That’s the biggest increase since June 2013. The rate touched 7.60 percent, the highest since March 14. The 2 percent securities due in February 2024 declined 3.185, or 31.85 euros per 1,000-euro ($1,264) face amount, to 72.26.

Greek bonds are sliding after euro area finance ministers clashed with the nation’s leaders over their desire to sever a bailout program.

The concern is that Greece won’t be able to finance itself at sustainable rates without the support of its regional partners, while the lack of supervision may lead to the country backtracking on reforms agreed with the European Union and the International Monetary Fund.

Trading of Greek government debt through the electronic secondary securities market, or HDAT, was 103 million euros Tuesday, the highest since Sept. 24. Trading plunged to zero in October 2011 from a peak of 136 billion euros for the month of September 2004. [Bloomberg]

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