Greek bonds soar after deal with creditors
Greek bond yields fell to their lowest in more than a year on Tuesday after Athens reached an agreement with its lenders on financial reforms early in the day, removing a major obstacle holding up fresh bailout funds for the cash-starved country.
The yield curve returned to normal, a sign of easing fears of another restructuring of privately held government debt.
Ten-year yields fell closer to 7 percent, a level with psychological significance in the eurozone – several countries were forced to seek bailouts after their borrowing costs surged above it.
“I can’t see the rally in Greek bonds stopping anytime soon,” said DZ Bank strategist Daniel Lenz.
Greek 10-year yields fell to 7.07 percent, their lowest since October 2014.
They are about a third what they were in July, when bailout negotiations between Athens and its eurozone partners reached a critical point and many feared Greece would be forced out of the single currency.
Two-year yields were down half a point at 6.10 percent, having reached almost 60 percent in July.
Two-year yields had been trading above 10-year yields for most of 2015, a phenomenon common in countries considered close to default.
Greece has been keen to complete its first assessment of the bailout package so it can start talks with the eurozone and the International Monetary Fund on debt relief.
“All this suggests that next year, Greece will start discussions with the creditors on debt relief. If agreed, it would allow the ECB to include Greece in its QE program by mid-next year,” said Athanasios Vamvakidis at Bank of America Merrill Lynch.