Greece’s Bonds Rise as Officials, Creditors Draft Dueling Plans

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Greece’s sovereign bonds advanced as the nation’s government submitted a new proposal aimed at breaking a stalemate over financial aid as the country’s creditors set about finalizing their alternative plan.

Two-year notes halted a two-day drop while Greek stocks fell for a third day as investors weighed the possibility of officials reaching an agreement to unlock funds and avoid the country defaulting. Four months of antagonism and extended deadlines have seen Greek bonds become the Europe’s worst-performing government-debt market, sliding 6 percent this year through Monday, according to Bloomberg World Bond Indexes.

“It’s difficult to position yourself,” said Lyn Graham-Taylor, a rates strategist at Rabobank International in London. “There obviously was an effort overnight to make some headway, but we’re going to have to see how that plays out.”

Greek two-year note yields fell 169 basis points, or 1.69 percentage point, to 23.21 percent at 4:27 p.m. London time, having increased 148 basis points over the previous two days. The 3.375 percent security due in July 2017 rose 1.97, or 19.70 euros per 1,000-euro ($1,112) face amount, to 69.435. The 10-year bond yield dropped 20 basis points to 11.30 percent.

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Trading in Greek government bonds is scant, with no turnover through the central bank’s electronic secondary securities market, or HDAT, on May 29, according to Athens News Agency, or ANA. The market was closed Monday for a holiday.

Volumes Plunge

Data from the Bank of Greece showed trading volume across all maturities totaled 2 million euros last month, matching that of April, the least since February 2012. Volume plunged to zero in October 2011 after peaking at 136 billion euros in September 2004, the data showed.

The difference between the bid and offer yields for Greece’s two-year securities, a measure of the bonds’ liquidity, was about 105 basis points, according to data compiled by Bloomberg. In contrast, the spread on similar-maturity German notes, the euro region’s benchmark sovereign securities, was less than 0.5 basis point.

German two-year notes yielded minus 0.2 percent. A negative yield means investors buying the securities now will get back less than they paid when the debt matures.

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