Greek Bonds Climb for Fifth Day on Buyback Optimism

Greece’s 10-year bonds advanced for a fifth day, pushing the yield to the lowest since the country’s debt was restructured in March, after the nation said it has reached a deal to buy back some of its sovereign securities.

Ten-year bonds pared their gains on concern that optimism over the purchases had pushed prices too high. The buyback paves the way for European officials to disburse the next tranche of international aid for Greece. German bunds fell for a third day as demand for the safest assets declined. Austrian and French 10-year bonds also dropped. Italian securities climbed as borrowing costs at an auction of one-year bills fell to the lowest in nine months.

“The best time to have got long Greece bonds was ahead of the buyback,” said Padhraic Garvey, head of developed markets debt strategy at ING Groep NV in Amsterdam, referring to a bet an asset will rise. “From here I’d expect them to drift, most of the rally has happened.”

Greek 10-year yields fell six basis points, or 0.06 percentage point, to 13.15 percent at 5 p.m. London time after dropping to as low as 12.46 percent. The 2 percent security maturing in February 2023 rose 0.225, or 2.25 euros per 1,000- euro ($1,304) face amount, to 43.95 percent of face value.

Investors tendered Greek bonds with a face value of 31.9 billion euros, Greece’s Public Debt Management Agency said in a statement on its website today. The weighted-average purchase price to be paid is 33.8 percent of face value, according to the statement.

Greek Buyback

Greece set prices for the repurchase of its government debt ranging from 32.2 percent of face amount for securities due in 2037 to 2042, to 40.1 percent for bonds maturing in 2023.

Greece is using a 10 billion-euro loan from Europe’s bailout fund to retire debt issued earlier this year in the biggest sovereign restructuring in history. International bailout funds to Greece have been frozen since June.

“They needed to get the buyback out of the way to crystalize some debt relief and that paves the way for the finance ministers to look at the aid,” said Owen Callan, an analyst at Danske Bank A/S (DANSKE) in Dublin.

Volatility on Italian debt was the highest among euro-area nations tracked by Bloomberg, followed by those of Ireland and Portugal, according to measures of 10-year bonds, two- and 10- year yield spreads and credit-default swaps.

Italian Yields

Italian 10-year yields fell eight basis points to 4.64 percent, while the rate on the nation’s two-year note dropped 13 basis points to 2.10 percent.

Italy sold 6.5 billion euros of 364-day bills at an average yield of 1.456 percent, the lowest since March 13 and down from 1.762 percent at the previous auction on Nov. 13. Investors bid for 1.94 times the amount of bills offered, up from 1.76 times last month.

“The bill auction was very successful,” said Alessandro Giansanti, a senior fixed-income strategist at ING Groep NV in Amsterdam. “Investor demand for the front-end of the curve is still present.”

Italy is scheduled to sell bonds maturing in 2015 and 2026 tomorrow.

Germany’s 10-year bund yield rose two basis points to 1.34 percent after climbing to 1.35 percent, the most since Dec. 6.

The rate on similar-maturity Austrian bonds increased one basis point to 1.73 percent and that on French debt also climbed one basis point to 1.97 percent.

German bonds returned 4.2 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italy’s debt gained 19 percent and Spain’s rose 4.8 percent.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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