Greece’s government bonds rose amid speculation Prime Minister George Papandreou will win a confidence vote today, paving the way for the country to receive financial aid.
Two-year notes gained for a third consecutive day, driving the yield on the securities down by the most in more than two weeks. Greek 10-year bonds also rose. European Union leaders have insisted Papandreou secure multi-party support to implement austerity measures that are a condition of the aid needed to avoid default as soon as next month. German bunds fell before the nation sells an additional 4 billion euros ($5.8 billion) of 10-year securities tomorrow.
“There’s some confidence building up in the market that Papandreou will win his vote,” said Glenn Marci, a strategist at DZ Bank AG in Frankfurt. “If he achieves that, there will be a level of relief.”
Greek two-year note yields, which surpassed 30 percent for the first time last week, fell 97 basis points to 27.64 percent as of 5 p.m. in London. The 4.6 percent security due May 2013 rose 0.995, or 9.95 euros per 1,000-euro face amount, to 68.965. The 10-year bond yield dropped 37 basis points to 16.97 percent. It rose to a euro-era record 18.35 percent on June 17.
Greek and Portuguese securities have both lost 19 percent in 2011, while Irish debt has dropped 11 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German government bonds have returned 0.3 percent in 2011, while Treasuries gained 3.3 percent the indexes show.
German bonds fell today, even as a report showed investor confidence in Europe’s largest economy dropped to the least in 2 1/2 years. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, fell to minus 9 from plus 3.1 in May. That’s the lowest since January, 2009. Economists predicted a decline to minus 3, according to a Bloomberg News survey.
Germany’s 10-year bund yield rose two basis points to 2.98 percent, after dropping earlier to 2.95 percent. It declined to 2.905 percent on June 16, the least since Jan. 11.
Yields on two-year notes were one basis point higher at 1.53 percent. They dropped to 1.43 percent on June 16, the lowest since Feb. 22.
Bunds have gained this year as investors sought a haven amid mounting concern that policy makers will fail to contain the euro region’s sovereign-debt crisis.
The yield on Greece’s two-year note has plunged more than 200 basis points, or 2 percentage points, in three days as German Chancellor Angela Merkel dropped calls for a mandatory bond exchange that might lead credit-rating companies to declare Greece in default.
Luxembourg Prime Minister Jean-Claude Juncker said yesterday that Papandreou assured him the government would do everything to avoid defaulting.
“The market’s focus is very much on Greece, and the no-confidence vote is in the spotlight,” said David Schnautz, a fixed-income strategist at Commerzbank AG in London. “Papandreou needs to get over that hurdle. There may be signs of more erosion of his support, and that may not go down well with the market. It’s a must-clear hurdle.”
Greek Bill Sale
Greece sold 1.25 billion euros of 91-day Treasury bills at an average yield of 4.62 percent. Investors bid for 2.94 times the amount of debt on offer. That compares with a so-called bid-to-cover ratio of 3.3 at the previous auction of similar securities held on May 17, which were allotted at 4.06 percent.
Portuguese 10-year yields fell two basis points to 11.13 percent. They reached an all-time high of 11.19 percent yesterday. Two-year note yields added two basis points to 13.21 percent after reaching a record 13.26 percent yesterday.
Irish 10-year yields declined six basis points to 11.40 percent. The yield jumped to a record 11.70 percent on June 17.
Spain sold 3 billion euros of three- and six-month bills. The Treasury in Madrid said it sold 632 million euros of three-month bills at an average yield of 1.568 percent, compared with 1.380 percent at the last sale on May 24. Spain also sold 2.36 billion euros of six-month debt at an average yield of 1.776 percent, compared with 1.766 percent on May 24.
Ministers at a euro-crisis meeting in Luxembourg “forcefully reminded the Greek government” to fulfill its commitments, Luxembourg Prime Minister Jean-Claude Juncker told reporters yesterday. Decisions on the next payout and a three-year follow-up package were put off until early July.
The International Monetary Fund, contributor of a third of the bailout money for Greece, Ireland and Portugal, has warned European leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.” At the same time, Papandreou is struggling to convince Greeks to accept a 78 billion-euro package of state-asset sales and budget cuts, which include a “crisis levy” on wages.