ECONOMY

Greek bonds miss out on ECB rally before finance ministers meet

Greece’s government bonds fell, excluded from gains made by its euro-area peers, amid investor concern a provisional agreement to extend aid to the country may not hold.

The nation’s three-year yields rose the most in three weeks before euro-area finance ministers meet in Brussels on Monday. Eurogroup Chairman Jeroen Dijsselbloem said on Sunday that the list of measures the Greek government proposed as part of its four-month aid agreement were “far” from complete and the country probably won’t receive an aid disbursement this month. Greek ministers floated the prospect of a referendum if their reforms were rejected.

Other euro-area securities advanced on Monday as the European Central Bank began purchases of the region’s sovereign debt as part of its 1.1 trillion-euro stimulus plan. While ECB President Mario Draghi has said that only investment-grade assets could be purchased, purchases of junk-rated bonds are still possible as long as the country is in a European-Union monitored program.

“The risks at these levels are that the market is even a bit over-complacent on Greece,” said Jan von Gerich, chief strategist at Nordea Bank AB in Helsinki. “The risks are larger than many perceive. If you listen to what the Greek government is saying, it’s clear they are still trying to do things differently. In any case it’s not going to be conclusive for resolving the Greek funding issue,” he said of today’s Eurogroup meeting.

That may include Greece beginning in July. That’s when there would be sufficient redemptions of bonds, held by the central bank under its previous Securities Market Program, to enable it to purchase additional debt without exceeding its limit of 33 percent of a single nation’s securities.

Three-Year Yields

Greek three-year yields rose 147 basis points, or 1.47 percentage points, to 15.51 percent at 12:21 p.m. London time. The 3.375 percent security due July 2017 fell 2.295, or 22.95 euros per 1,000-euro ($1,088) face amount, to 77.45. The ten- year rate climbed 50 basis points to 9.91 percent.

German 10-year bunds rose, with yields dropping five basis points to 0.34 percent, while the rate on similar-maturity Irish bonds reached a record-low 0.829 percent.

Bonds of Greek banks also fell and were the biggest decliners in Bank of America Merrill Lynch’s Euro Financial High Yield index.

Alpha Bank AE’s 400 million euros of 3.375 percent notes due June 2017 led declines, sliding 3.38 cents on the euro to 77.25 cents, the lowest in two weeks, with the yield rising to 16.1 percent, data compiled by Bloomberg show. Piraeus Bank SA’s 5 percent bonds maturing in March 2017 fell 3.52 cents on the euro to 77.1 cents, the lowest since Feb. 20, with the yield climbing to 19.65 percent, the data show.

Greece is scheduled to sell 1 billion euros in 13-week Treasury bills on Wednesday. At the last auction of bills, the Athens-based debt office sold 1.14 billion euros of 26-week securities at an average yield of 2.97 percent, the highest since April.

[Bloomberg]