Greek Bonds Rise for First Time in Three Days After ECB Waiver

  • ECB makes Greek securities eligible for refinancing collateral
  • Debt still not eligible for ECB’s bond-buying program

Greece’s government bonds rose along with the region’s peripheral securities after the European Central Bank agreed to made the nation’s debt eligible for collateral, allowing the country’s lenders access to cheaper refinancing.

Greece’s 10-year bonds advanced for the first time in three days, while the yield on notes due in July 2017 slid to the lowest in two weeks. The waiver has been reinstated after its suspension in February 2015 when Prime Minister Alexis Tsipras’s government said it wouldn’t meet the terms of the nation’s then-bailout program.

Greek lenders can now pledge the nation’s junk-rated debt against regular central-bank funding. However, the ECB said it still won’t buy the nation’s sovereign securities as part of its asset-purchase plan and will examine the possibility at a later stage. 

Europe’s core government bonds were confined to narrow trading ranges as Britain began voting on whether to remain a member of the European Union. 

“For Greek government bonds the ECB decision is good news,” said Daniel Lenz, a market strategist at DZ Bank AG in Frankfurt. “Greece showed more willingness for compromise this time and the creditors did not want to have additional headline risk, given the Brexit referendum. In case there is no Brexit, I would expect more demand for Greek government bonds.”

Yields Drop

Greece’s 10-year bond yields fell 18 basis points, or 0.18 percentage point, to 7.81 percent as of 3:39 p.m. London time. The 3 percent security due in February 2026 rose 1.01, or 10.1 euros per 1,000-euro ($1,137) face amount, to 72.29. The yield climbed above 19 percent in July 2015, having reached 44.21 percent in March 2012 at the height of the region’s debt crisis.

The yield on the nation’s notes maturing in July 2017 dropped 60 basis points to 7.52 percent, after reaching 7.44 percent, the lowest since June 10.

Euro-area governments approved a bailout payment to Greece of 7.5 billion euros last week, ending months of negotiations over economic reforms and paving the way for the waiver. Even though Greek bonds have been excluded from the ECB’s quantitative-easing program, they are the best performers among sovereign securities this year, according to Bloomberg World Bond Indexes. 

Still, trading in Greek government debt remains limited. The turnover through the central bank’s electronic secondary securities market, or HDAT, totaled 18 million euros this month through June 17, according to data from the Bank of Greece. The volume across all maturities was 43 million euros in May. It peaked at 136 billion euros in September 2004.

The yield on benchmark German 10-year bunds increased one basis point to 0.07 percent, while that on similar-maturity Italian securities fell three basis points to 1.41 percent. Spanish 10-year bond yields dropped three basis points to 1.47 percent.

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