Talks uncertainty raises Greek bond yields


As the negotiations between Athens and its creditors have not got off to the best possible start, the Greek bond market has been under considerable pressure in recent days. This is indicative of the sentiments of investors, who once again have to wait and see how the talks will end.

The creditors’ technical experts arrived in Greece on Monday and requested more information from the Greek authorities concerning fiscal data and the social security reform, while on Tuesday they started their contacts with the Greek team to establish the state of the bailout program and the economy, just as the eurozone and the International Monetary Fund are trying to agree how to handle the negotiations with the government.

On Tuesday the yield of the benchmark 10-year Greek bond climbed to 9.3 percent from 9.1 percent on Monday and 8.7 percent on Friday. The five-year bond yield had a parallel course, growing yesterday to 10.3 percent from 9.6 percent on Monday, 9.3 percent on Friday and 8.6 percent last Wednesday.

The Greek market is currently experiencing significant pressure, particularly over the last couple of days, which analysts attribute to the investors’ leaning toward safer investment destinations and the negative noise the creditors have generated around the first review of the bailout program. This is all happening while the yields of sovereign bonds in the rest of the eurozone are declining, as investors abandon emerging markets in favor of safer havens, such as bonds.

Once again the domestic uncertainty does not allow the Greek economy to make the most of the international developments in its favor, as other eurozone countries are able to.

Reports that the creditors are seeking more fiscal measures and a stricter framework for the reform of the social security system, and Finance Minister Euclid Tsakalotos’s position regarding the attitude of the IMF ahead of the negotiations have reinstated a climate of uncertainty among investors regarding what will happen in the next few months.