Greek bond yields dropped sharply on Wednesday, set for a fifth straight day of falls, following a successful five-year bond sale – Greece’s first since exiting its bailout last year.
Greece’s 10-year government bond yield fell more than six basis points to a low of 3.915 percent, its lowest level since August 1, while Greece’s five-year government bond yield was last down three basis points to a six-month low of 2.928 percent.
A vote by Greek parliament last week cleared a path for Greece’s northern neighbor Former Yugoslav Republic of Macedonia (FYROM), under its new name, to join NATO, and paved the way for a Greek five-year a bond sale.
The bond issue, yielding 3.6 percent and the country’s first since its third international rescue package ended in August, attracted investor orders worth four times the issue’s size, government officials said on Tuesday.
“In terms of rational, right now, when you adjust spreads by volatility, Greece offers a chunky pick up versus Bunds,” Jamie Costero, bond strategist at BBVA, said.
He said when you looked at the volatility-adjusted spread of Greece this was double that of Spain and more than double of Italy.
Greek 10-year government bonds offer a spread of 369 basis points over the 10-year German Bund, seen as the risk-free benchmark for the region, versus 104 basis points for Spain’s 10-year bond spread.
Pause for breath
Elsewhere, broader eurozone bond yields held firm on Wednesday after British lawmakers voted down a proposal in parliament that aimed to prevent a potentially chaotic “no-deal” Brexit which markets appear reluctant to price in.
Core bloc bond investors paused for breath following the vote, and ahead of key eurozone data, the US Federal Reserve press conference, and the resumption of trade talks between China and the US, all due later on Wednesday.
British lawmakers on Tuesday instructed Prime Minister Theresa May to reopen a Brexit treaty with the European Union to replace a controversial Irish border arrangement – and promptly received a flat rejection from Brussels.
At the same time, parliament rejected a proposal to stop a potentially chaotic “no-deal” exit by making May ask Brussels for a delay if she cannot get a deal past lawmakers.
The eurozone bond market has grown a little immune to Brexit noise, Christoph Rieger, rates strategist at Commerzbank, said.
“Given the UK amendments and what (European Council President Donald) Tusk said, this combination increases the risk of a disorderly Brexit. The market is reluctant to price this scenario,” Rieger said. “The market still maintains its faith that reason will prevail. This morning, it looks quite a fantasy to come up with such a scenario.”
Investors bought German Bunds in the run-up to Tuesday’s vote. German 10-year Bund yields were last trading at 0.192 percent, close to levels traded late on Tuesday.
British 10-year government bond yields fell 1.4 basis points to 1.255 percent in early trade.
Eurozone bond yields were largely unchanged, even though Goldman Sachs and others, saw the chance of a no-deal Brexit increasing.