Greece’s government bonds rose after the nation said it will start drafting an accord on Wednesday with international creditors to unlock much-needed bailout funds.
Yields on Greece’s two-year notes dropped the most in a week, even after international officials including European Commission Vice President Valdis Dombrovskis said a deal wasn’t imminent. A Greek official, who asked not to be identified, said an agreement that included changes to the nation’s pension system and a long-term solution on debt was close.
“We believe an agreement will be reached in the end,” said Jussi Hiljanen, head of fixed-income research at SEB AB in Stockholm. “But this is still a political process that’s wrought with uncertainty. Despite some positive headlines, it’s hard to predict what will happen next.”
Greece’s two-year note yields dropped 108 basis points, or 1.08 percentage points, to 23.82 percent as of 4:49 p.m. in London. They climbed 181 basis points on Tuesday. The 3 percent security due in February rose 1.270, or 12.70 euros per 1,000-euro ($1,088) face amount, to 68.53 percent. Greek 10-year yields fell 67 basis points to 11.19 percent.
The impact of the Greek official’s words was felt beyond Europe’s most-indebted nation, with yields on Italian and Spanish debt also falling the most in a week. The official conceded that Greece still has disagreements with creditors.
Spain’s 10-year bond yield dropped seven basis points to 1.79 percent, while the yield on equivalent Italian debt slipped nine basis points to 1.85 percent. The euro climbed 0.1 percent on the day to $1.0888.