Greek bank bonds slumped after the election of an anti-austerity party heightened investor concerns the nation is on a collision course with the European Union that could derail its bailout program.
Alpha Bank AE’s 500 million euros ($563 million) of 3.375 percent notes issued in June dropped two cents on the euro to 83 cents, approaching a record 82.3 cents reached on Jan. 7, data compiled by Bloomberg show. The 750 million euros of five-year bonds sold by National Bank of Greece SA in April fell 0.9 cent to 75.8 cents, erasing gains fueled by last week’s unveiling of the European Central Bank’s quantitative easing program.
The Syriza party’s victory hands its leader Alexis Tsipras a mandate to confront Greece’s austerity program that was imposed in exchange for 240 billion euros of aid since May 2010. Tsipras now has to persuade the ECB and other creditors to keep the rescue money flowing even as he tries to meet his election pledge to end austerity measures, including writing down Greek debt.
“If Syriza doesn’t agree a new program with Greece’s creditors, then the ECB could cut off funding to Greek banks,” said Roger Francis, an analyst at Mizuho International Plc in London. “The situation would get pretty ugly, pretty quickly.”