- Nation's 10-year bond yield jumps to more than 10 percent
- Greek banks shares tumble as investors shun risky assets
As the global market rout deepens, Greek assets are again the ones that are suffering the most.
The nation’s stocks are back to being the biggest decliners of the year as they fell to their lowest prices since 1990. Its bonds, which have already lost more than three times as much as the second-worst performer in the euro area in 2016, saw yields on securities maturing in a decade rising to more than 10 percent.
With growing concern over global market turmoil and yet another stalled bailout review in Greece, investors are abandoning assets deemed riskier. Greek banks, which have already lost almost all of their market value, plunged a further 24 percent on Monday, the most since August.
“There’s a complete buyers’ strike across the board today,” said George Athanasakis, equity sales director at Pantelakis Securities SA in Athens. “It’s all about international malaise hitting a very illiquid market, made worse by that spike in bond yields. There’s the risk that if the government’s aid negotiations drag on for much longer, then the banks and the economy will hurt.”
The benchmark ASE Index fell 7.9 percent, as Eurobank Ergasias SA, Piraeus Bank SA and National Bank of Greece SA all plunged more than 27 percent. With a 26 percent tumble in 2016, the ASE is the worst performer among 93 global equity indexes tracked by Bloomberg. It’s slumped twice as much as the Stoxx Europe 600 Index.
The yield on 10-year Greek debt jumped 61 basis points, or 0.61 percentage point, to 10.18 percent. It’s climbed from 8.29 percent at the end of 2015.
“We are right now in a seller’s market so investors are looking every day for the weakest link,” said Ricardo Garcia-Schildknecht, an economist at UBS Group AG. “Right now we have some news out of Greece that is confusing and worrying people and so that’s an obvious target.”
Rates are still far from their peak of around 20 percent in July, after Prime Minister Alexis Tsipras broke talks with European creditors and called a referendum over bailout terms, increasing the risk that the nation that triggered the debt crisis would be forced out of the euro. His capitulation and eventual agreement to a new package helped spark a rally, and the country’s bonds earned a 21 percent return in 2015.
Greece’s government remains at loggerheads with its creditors over demands for additional belt-tightening measures, including pension cuts, while farmers, independent professionals and workers protest its social security overhaul proposals. Representatives of the International Monetary Fund, the European Central Bank, the European Commission and the European Stability Mechanism left Athens after a week of talks on Friday with no breakthrough in sight and date set for their return to complete yet another stalled bailout review.
Even as the government can build arrears to its suppliers and vendors to stay afloat through May in the absence of bailout-fund disbursements, uncertainty is weighing on the country’s recovery prospects. The European Commission said last week that Greece’s economy will shrink by 0.7 this year, after stagnating in 2015. Economic weakness adds to Greek banks’ woes, as lenders struggle to cope with more than 100 billion euros ($111 billion) of non-performing loans and the impact of capital controls imposed last summer.
If Greece fails to unlock more funding, it may hit a cash crunch by the middle of the year, with the nation facing redemptions and interest payments of almost 3 billion euros in July.
“The Greek crisis is not over, it’s not solved, and there are still a lot of problems, so if you want to get rid of risk, then you have to sell Greece as well,” said Christoph Kind, head of asset allocation at Frankfurt Trust, which manages about $20 billion and doesn’t hold any Greek assets. “It’s definitely, risk off, and the periphery is suffering a lot.”