Greece Bond Yields Drop to Lowest Since Restructuring in March
Greek 10-year bonds advanced for a 10th day, pushing yields to the lowest since the nation’s debt was restructured in March, amid optimism European policy makers are taking steps to stem the nation’s fiscal crisis.
Spain’s government securities rose for a third day as the nation sold 3.88 billion euros ($5 billion) of securities at an auction, exceeding its maximum target. Greece’s government has appointed a team of officials to begin preparatory work on a debt buyback, financial news website Capital.gr reported, without citing anyone. German bonds were little changed as leaders of the 27 European Union nations meet today for budget talks. Finance ministers resume debate on Greece next week.
“It is very likely that we see an improvement in the loan terms for Greece,” said Norbert Aul, a rates strategist at Royal Bank of Canada in London. “We have seen in the past this also feeds through to the other bailout countries. It was a good sign that we exceeded the overall target” at the Spanish auction, he said.
The yield on Greek 10-year bonds fell 32 basis points, or 0.32 percentage point, to 16.43 percent at 4:34 p.m. London time, after falling 65 basis points to 16.10 percent. The 2 percent security due February 2023 climbed 0.78, or 7.80 euros per 1,000-euro face amount, to 34.47 percent of face value.
German Chancellor Angela Merkel said yesterday she saw a chance for a Greek aid deal as soon as next week, while Finance Minister Wolfgang Schaeuble said the Eurogroup is united on the idea of a bond buyback for the Mediterranean nation, although some “technical questions” remained open.
European Union finance ministers meeting in Brussels two days ago left the next tranche of Greek aid frozen until another gathering on Nov. 26. They failed to tackle the dual task of steering an extra 32.6 billion euros to the country through 2016 while finding a way to tame the resulting increase in its debt, already the highest in Europe.
Spain sold notes due in October 2015 at an average yield of 3.617 percent, down from 3.66 percent at a similar auction on Nov. 8. The country also sold securities maturing in July 2017 and April 2021. Separately, it sold 3.3 billion euros of bonds due in September 2017 in a private placement to the social security reserve fund.
“Spain has been doing well,” Allan von Mehren, chief analyst at Danske Bank A/S (DANSKE) in Copenhagen said before the auction. “Spanish bonds were selling off a bit until the beginning of this week but we’ve seen risk sentiment improve since then.”
The Spanish 10-year yield fell five basis points to 5.66 percent after dropping to 5.64 percent, the lowest level since Nov. 7.
Volatility on Portuguese bonds was the highest in euro- region markets today, followed by those of Ireland, according to measures of 10-year or equivalent-maturity debt, the spread between two- and 10-year securities, and credit default swaps.
The Stoxx Europe 600 Index (SXXP) of shares gained for a fourth day, rising 0.6 percent. U.S. markets are closed today for the Thanksgiving public holiday.
Germany’s 10-year yield was at 1.43 percent after rising to 1.45 percent, the highest level since Nov. 7.
Euro-area services and manufacturing output shrank for a 10th month in November, a report showed today. A composite index based on a survey of purchasing managers was little changed at 45.8, from 45.7 in October, London-based Markit Economics said. A reading below 50 indicates contraction.
German bonds returned 3.4 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish securities rose 3.1 percent.