Greek Bonds Advance Most in Two Weeks on Signs of Rapprochement

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Chancellor Merkel and Prime Minister Tsipras
German Chancellor Angela Merkel, left, greets Greece's Prime Minister Alexis Tsipras ahead of a European Union leaders summit in Brussels, on Thursday, April 23. Photographer: Andrea Bonetti/Greek Government via Bloomberg

Greece’s government bonds rallied the most in two weeks as a government official said Prime Minister Alexis Tsipras held talks with German Chancellor Angela Merkel in a “positive climate.”

Bond prices climbed to the highest in a week and stocks jumped. Tsipras asked to speed up moves toward an agreement on Greece’s future funding, the official said, asking not to be named in line with policy. That added to signs tension may be thawing before Friday’s euro-area finance ministers meeting in Riga, Latvia.

“We are seeing comments from the Greek government this afternoon suggesting that they have had a positive talk with the German government,” said Owen Callan, a fixed-income strategist at Cantor Fitzgerald LP in Dublin. “Probably there was too much pessimism priced in at the end of last week and the start of this week and we are kind of seeing a reversal of that.”

Greece’s 3.375 percent securities maturing July 2017 rose 3.175, or 31.75 euros per 1,000-euro ($1,081) face amount, to 66.275 at the 5 p.m. London close, the highest end-of-day price since April 15. The yield on the three-year notes fell 276 basis points, or 2.76 percentage points, to 24.87 percent. It climbed to 30.05 percent on Wednesday, the highest since the nation’s debt was restructured in 2012.

Greece’s ASE Index of stocks rose 2.4 percent.

Latvia Talks

In another sign of improving relations, Tsipras’s office and leaders of institutions that provided Greece with bailout loans have established a hotline for direct contact, according to two people familiar with the matter. Those creditors want Greece to commit to reforms so that aid payments can be released before it runs out of money.

Spanish 10-year government bonds held their two-day gain, with the yield little changed at 1.37 percent. Yields on benchmark German 10-year bunds, perceived to be among the region’s safest assets, were also little changed, at 0.17 percent.

That’s a turnaround from last week, when the prospect of Greece sliding toward an accidental default and exit from the euro area prompted flight from the region’s higher-yielding assets.

Trading in Greek government bonds is scant, with no turnover through the central bank’s electronic secondary securities market, or HDAT, on Wednesday, according to ANA.

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