Greek assets hold their ground as crisis enters “11th hour”
Greek financial assets held their ground on Friday, putting a bruising week behind them as investors pinned their hopes on an emergency meeting of eurozone leaders next week producing an agreement to unlock aid for Athens and avert looming default.
The benchmark prices of stocks — especially in the financial sector — stabilized, while government and corporate borrowing costs dipped.
The uneasy calm comes as the crisis enters perhaps its most critical phase — the “11th hour,” according to British Finance Minister George Osborne — with Greece days away from potentially defaulting on debt repayments to the International Monetary Fund.
“Markets think we’ve seen this story before. People have got used to these kind of headlines. A lot of it is posturing and speaking to their own constituencies,” said Michael Michaelides, European rates strategist at Royal Bank of Scotland.
“Most people think there will be a deal, although it’s definitely not one way,” he said.
Athens’s benchmark ATG equity index, which hit a three-year low on Thursday, rose 0.5 percent to 686 points. It remains down 12 percent this week, though, and down 17 percent since the start of 2015.
The Athens Stock Exchange FTSE Banks Index advanced by 1.5 percent, but has lost 15 percent this week and has almost halved in value this year.
The yield on Greece’s two-year bond maturing in July 2017 slipped to 28.7 percent from 30.5 percent at the close of trade on Thursday. It rose above 30 percent this week for the first time since April.
The yield on the benchmark bond of Hellenic Telecom maturing in July 2020, one of Greece’s most liquid bonds, was virtually flat at 8.78 percent.
Five-year Greek credit default swaps, the cost of insuring exposure to Greek debt, eased back slightly to 2,904 basis points from 2,920 on Thursday, data provider Markit said on Friday.
Default could lead to Greece eventually leaving the eurozone. More immediately, banks could be closed and capital controls imposed to prevent a flood of capital leaving the country.
The European Central Bank will hold a special conference call on Friday — the second in three days — to consider adding more emergency liquidity for Greek banks facing a quickening drain on their cash.
Given that high degree of uncertainty, trading in Greek assets is even less active than normal.
“Liquidity is minimal, no one is really trading and people are withdrawing money from banks like it’s the end of the world,” said Phoebus Theologites, chief investment officer at SteppenWolf Capital.
“Prices, in the current context, mean nothing. If banks don’t open on Monday, you can imagine what will happen,” he added.
Greek savers have withdrawn more than 3 billion euros from banks this week, far more than the 1.1 billion euros additional funding granted by the ECB via its weekly Emergency Liquidity Assistance programme on Wednesday.
ECB Executive Board member Benoit Coeure said on Thursday he didn’t know if Greek banks would be able to open on Monday.
[Reuters]
