German Bonds Rise as Twists in Greek Debt Talks Buffet Markets

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German government bonds advanced for a second day as Greek Prime Minister Alexis Tsipras prepared for a Brussels meeting with the heads of three creditor institutions with a clear agreement on financial aid still to be reached.

Spanish securities erased earlier gains as Germany downplayed the chances of an imminent deal. That’s in contrast to Monday when Spain’s 10-year bond yields dropped the most in a year amid speculation Greece was moving closer to an accord with its creditors.

“There’s a lot of nervousness,” said Jan von Gerich, chief strategist at Nordea Bank AB in Helsinki. “Everyone is following what happens in Greece. We had quite a strong reaction pricing in an agreement and now that it doesn’t seem that clear we’re going in the other direction.”

Germany’s 10-year bund yield fell three basis points, or 0.03 percentage point, to 0.84 percent as of 4:22 p.m. London time. The 0.5 percent security due in February 2025 rose 0.29, or 2.90 euros per 1,000-euro ($1,119) face amount, to 96.86.

With Greece facing a June 30 deadline to make payments to creditors, bond markets have been buffeted by statements from all sides about the chances of a bailout deal. Spanish 10-year bonds have traded in a range of more than 10 basis points for each of the past 10 days, compared with a median of about seven in the past year.

Spain, Italy

Spain’s 10-year bond yields were little changed at 2.12 percent on Wednesday, having earlier dropped two basis points. They fell 16 basis points on Monday, the steepest decline since June 2014. The yield on similar-maturity Italian bonds was little changed at 2.13 percent, after earlier falling as much as three basis points and climbing as much as nine basis points.

Finance ministers will gather later on Wednesday in an effort to reach a deal before Greece’s bailout expires at the end of the month and about 1.5 billion euros in payments come due to the International Monetary Fund.

Greece’s creditors handed the government revised terms for an agreement on bailout funds on Wednesday morning, according to a person familiar with the matter, who asked not to be identified because the negotiations are private.

“There is still a lot of work to do,” Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-area counterparts, told reporters in Brussels. “We are not there yet.”

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