Greece’s two-year government bond yields rose sharply on Friday after the expulsion of two lawmakers over bailout negotiations shrank Prime Minister Alexis Tsipras’s parliamentary majority.
Greece approved a reform bill on Thursday to secure further aid from its international lenders but Tsipras expelled two dissenting lawmakers after the vote.
Greek two-year yields rose 60 basis points to 6.64 percent, erasing falls seen earlier in the week.
“While we have had an agreement on the deal… some investors are thinking that there may be some instability on the political side in Greece now,” Natixis strategist Cyril Regnat said.
Ten-year Greek bond yields rose 10 bps to 7.18 percent, though they are more than 12 percentage points below levels seen in July when concerns about a Greek exit from the eurozone were at a peak.
They fell to their lowest in more than a year earlier this week following news that Athens had reached an agreement with its lenders on financial reforms, removing a major obstacle holding up fresh bailout funds to the cash-strapped country.
“The big battle will be the first review [of the aid program] which is starting later this year, but in all likelihood will be pushed way into next year,” RBS rates strategist Michael Michaelides said.