ECONOMY

Greek bonds rise a second day after debt negotiation assurances

Greece’s bonds rose for a second day after Prime Minister Alexis Tsipras gave assurances his four-day-old government will negotiate “with safety” with the nation’s troika of official creditors over its debt obligations.

Italian securities rose along with Spain’s as the euro- area’s higher-yielding debt outperformed benchmark German bunds. Tsipras gave assurances that Greece won’t make any unexpected moves regarding its finances in about two hours of talks with European Parliament President Martin Schulz in Athens on Thursday. Germany’s two-year rate dropped to a record low as euro-area consumer prices fell more in January than economists forecast.

“The news headlines from Greece have moved from catastrophic to just bad,” said Christoph Rieger, head of fixed-rate strategy at Commerzbank AG in Frankfurt. “A lot of the news has been priced in. We now need a headline clearly suggesting that a bailout extension is within reach. This is the all-decisive factor.”

Greek 10-year yields fell 21 basis points, or 0.21 percentage point, to 9.96 percent at 10:57 a.m. London time. They’re up from 8.41 percent on January 23, before the nation’s general election two days later. The 2 percent bond due in February 2025 rose 0.96, or 9.60 euros per 1,000-euro ($1,136) face amount, to 59.65.

Yield Premium

The rate on Greece’s three-year notes dropped 59 basis points to 16.69 percent after climbing to 18.88 percent on Thursday, the highest level since the nation restructured its debt in 2012. Its yield premium of more than 6 percentage points over the 10-year bonds may reflect investors’ concern they won’t get paid back in full.

The difference between the bid and offer yields for Greek 10-year government debt, a measure of the bonds’ liquidity, was about 30 basis points on Friday, according to data compiled by Bloomberg. In contrast, the spread on similar-maturity German bunds, the euro region’s benchmark securities, was 0.2 basis point.

The ASE Index of shares climbed 1 percent, up for a second day as National Bank of Greece SA and Alpha Bank AE gained more than 5 percent. That’s helping Greece’s stock index trim its monthly slump to 10 percent. The ASE is down 46 percent from its high on March 18.

Jeroen Dijsselbloem, chair of the euro region’s group of finance ministers, is due to arrive in the Greek capital on Friday for further talks.

The yield on Italian 10-year debt declined four basis points to 1.56 percent, halting a three-day increase. Similar- maturity Spanish bonds rose for the first time in five days, with the rate falling three basis points to 1.42 percent.

Prices Slide

The annual inflation rate in the euro-area fell to minus 0.6 percent this month, matching the biggest decline in prices in the history of the single currency. The drop exceeded economists’ estimates for a 0.5 percent decrease.

Germany’s 10-year bund yield declined one basis point to 0.35 percent, approaching the record-low 0.328 percent set on Thursday. The nation’s two-year rate touched minus 0.184 percent, the least since Bloomberg began collecting the data in 1990.

A negative yield means investors buying the securities will get less back when the debt matures than they paid.

Trading of Greek government bonds across all maturities through the electronic secondary securities market, or HDAT, was 19 million euros on Thursday, ANA reported. Monthly trading volumes plunged to zero in October 2011 from a peak of 136 billion euros in September 2004, Bank of Greece data show.

Greek securities delivered the worst returns among sovereign debt tracked by Bloomberg’s World Bond Indexes this year through Thursday. They lost 2.3 percent, set for a fifth consecutive monthly decline, while Germany’s returned 1.8 percent and Spain’s earned 1.5 percent.

[Bloomberg]