ECONOMY

Greek bonds advance as ministers search for support on debt deal

Greece’s three-year government notes advanced for the first time in six days as the nation’s Prime Minister and Finance Minister tour Europe to gain support for their plans to strike a new deal with official creditors.

Yields on shorter-dated Greek securities remained higher than those on longer-maturity debt, suggesting investors are still concerned they won’t get paid back in full. Rates on Austrian and Dutch 10-year debt were among those to touch record lows on Monday. Benchmark German bunds were little changed as data confirmed manufacturing output in the euro area expanded in January.

“The focus will clearly be on developments in Greece this week,” said Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris. “Given the deterioration we’ve seen in Greek markets it makes sense to see some stabilization. I don’t think the worst-case scenario is the best to be priced in because it’s in everyone’s interest to reach an agreement.”

Greece’s three-year yield dropped 65 basis points, or 0.65 percentage point, to 18.50 percent at 10:26 a.m. London time. The 3.375 percent note rose 0.96, or 9.60 euros per 1,000-euro ($1,135) face amount, to 72.15. The rate increased 907 basis points last week. The nation’s 10-year yield fell 44 basis points to 10.73 percent.

Greek Prime Minister Alexis Tsipras traveled to Cyprus on Monday before trips to Rome, Paris and Brussels, with Berlin not yet on the agenda. Finance Minister Yanis Varoufakis visits London and Paris on Monday and Rome a day later.

Debt Writedown

While euro-area officials want Greece to stick to the austerity demands of its existing bailout agreement, Tsipras is seeking a debt writedown so he can increase public spending. The danger is that the Greek financial system is left without funding long before the May deadline for a deal.

“We’re not going to ask for any more loans,” Varoufakis said after meeting his French counterpart, Michel Sapin, on Sunday. “During this period, it is perfectly possible in conjunction with the ECB to establish the liquidity provisions that are necessary,” Varoufakis said, referring to the European Central Bank’s support for the nation’s lenders.

The rate on Dutch 10-year bonds fell one basis point to 0.36 percent and touch 0.356 percent, the least since Bloomberg began collecting the data in 1990. Austria’s 10-year yield reached 0.375 percent, also the lowest on record.

A purchasing managers’ index for manufacturing in the euro- area rose to 51 in January from 50.6 the previous month, Markit Economics Ltd. confirmed.

The yield on Germany’s 10-year bunds, the euro region’s benchmark sovereign securities, was little changed at 0.30 percent.

[Bloomberg]