Greek bond yields shot higher on Monday after the result of the vote that saw the anti-austerity SYRIZA party sweep to victory, but the European Central Bank’s decision last week to launch a roughly 1-trillion-euro quantitative easing program checked any wider contagion.
SYRIZA has said it will restructure Greece’s massive debts and leader Alexis Tsipras promised after Sunday’s poll that five years of “humiliation and suffering” imposed under its 240-million-euro bailout were over.
His choice of the right-wing Independent Greeks party, which also opposes the bailout terms, as a coalition partner unsettled some investors as it suggests a tough stance in talks with European Union and International Monetary Fund lenders.
“The positive implications of the ECB announcement on QE has provided a cushion and is likely to remain the dominant market force,” said Maria Paola Toschi, global market strategist at J.P. Morgan Asset Management.
“That said, the sooner the new Greek coalition government is established and negotiations with the troika can begin, the better for Greece, Europe and the markets.”
Greek three-year yields shot up nearly two full percentage points to over 12 percent, while 10-year yields rose 45 basis points to 9.21 percent.
That kept the yield curve sharply inverted, a sign investors are worried they may not get all their money back.
“A SYRIZA victory was expected but an anti-austerity coalition partner was not,” RBS analysts said in a note.