Credit risk indicators fall as Greek plan stokes deal optimism

Indicators of credit risk tumbled across the euro area after a new Greek financial proposal spurred speculation the country may avoid a default.

A gauge of investment-grade European corporate credit risk fell the most in two years, and Greek bonds rallied. A measure of how much banks expect to pay to borrow in euros, known as the FRA/OIS spread, plunged as much as 17 percent.

European officials voiced support for Greek Prime Minister Alexis Tsipras’s new plans ahead of talks today in Brussels that may be pivotal in determining whether the nation gets a bailout. An agreement could end months of deadlock, avert a Greek default and keep the country in the euro.

“These proposals go in the right direction,” European Economic Affairs Commissioner Pierre Moscovici said on Europe 1 radio.

The Markit iTraxx Europe Index fell as much as 7 basis points. It was down 5 basis points at 70 basis points as of 12:11 p.m. in London.

Piraeus Bank SA’s 500 million euros ($570 million) of 5 percent notes maturing in March 2017, rose as much as 8.7 percent to 61 cents on the euro, the biggest intraday jump since February, according to data compiled by Bloomberg.

Hellenic Telecommunications Organization SA’s 3.5 percent bonds climbed as much as 6.3 percent to 87 cents, the biggest gain since they were sold about a year ago. Public Power Corp.’s 500 million euros of 5.5 percent bonds due May 2019 rose as much as 9.9 percent to 67 cents, the largest jump since they were sold more than a year ago. The company is the nation’s biggest electricity provider.