Government bonds advance as market softens view of Syriza

Greece’s bonds climbed on Monday, with three-year yields dropping for a third day, amid easing concern that a victory for the anti-austerity Syriza party in this month’s elections would result in the nation leaving the euro region.

Ten-year Greek bonds also rose after Syriza’s Alexis Tsipras said in a January 10 interview with Real News that a government led by his party would repay debt maturing in March and keep Greece in the currency bloc. Polls last weekend put the opposition party ahead, but short of a level required for an absolute majority. Euro-area governments may sell more than 30 billion euros ($45 billion) of debt this week, according to a Commerzbank AG estimate.

“People are more relaxed that it won’t be the end of Europe if Syriza wins the elections,” said Daniel Lenz, lead market strategist for the euro area at DZ Bank AG in Frankfurt. “The risk of a path that would lead to a Grexit may have been a little bit exaggerated,” he said, referring to concern that Greece would leave the euro bloc. “Also, if there has to be a coalition, Syriza can’t act in a way that the market had feared.”

Greek three-year yields fell 128 basis points, or 1.28 percentage points, to 12.04 percent at 10:33 a.m. London time on Monday after dropping 229 basis points in the previous two days. The 3.375 percent note due in July 2017 rose 2.26, or 22.60 euros per 1,000-euro face amount, to 81.115. The nation’s 10-year rate fell 55 basis points to 9.60 percent

Tsipras Speech

With campaigning underway before Jan. 25 elections, Greece’s Prime Minister Antonis Samaras has said the vote will determine the nation’s euro membership. Only Samaras is talking about a Greek euro exit, Tsipras said in a January 10 speech.

Separate polls last week by Kapa Research and Alco put Syriza’s lead over Samaras’s New Democracy party at 2.6 percentage points and 3.2 percentage points, respectively, both little changed. The Kapa poll for Sunday’s To Vima newspaper, which ran under the front-page headline, “The Left’s Opportunity,” gave Syriza 28.1 percent support to 25.5 percent for New Democracy.

Greek securities lost 22 percent in the six months through January 9, according to Bloomberg World Bond Indexes as the prospect of a general election rekindled memories of the euro- area debt crisis. Germany’s returned 5.8 percent, the indexes show.

The rate on German 10-year bunds were little changed at 0.50 percent Monday.

Italy is due to sell 7 billion euros of bonds on January 13, while the Netherlands, Austria, Germany and Spain are also scheduled to hold auctions. In addition, Spain, Portugal and Slovenia may hold sales via banks, according to the Commerzbank estimate on January 8.