Greek Bonds Post Their Best Week Since July on Bailout Optimism

  • Second review of aid program could be completed Dec. 5: EU
  • Ten-year bond yields decline to the lowest since June

Greek government bonds posted their biggest weekly advance since July amid optimism a review of the nation’s bailout program will soon be completed.

The yield on the nation’s 10-year bonds broke below the 8 percent mark this week and touched the lowest since June. A European Union official said that, if all went to plan, finance ministers could look at debt-relief measures at their Dec. 5 meeting and that the International Monetary Fund could get involved in the Greek bailout. Doubts about the sustainability of Greece’s debt load have kept it locked out of global bond markets for more than two years.

“There is increasing optimism,” said Marc Ostwald, a strategist at ADM Investor Services International Ltd. in London. If the IMF participates, one of its “key demands is that there’ll be some sort of debt forgiveness, which would ease the strain on Greece.”

Greece’s 10-year bond yield fell 61 basis points, or 0.61 percentage point, this week to 7.79 percent as of 4:30 p.m. London time. That’s the biggest drop since July 1. The price of the 3 percent security due in February 2026 was at 73.49 percent of face value.

There have been false starts on Greece’s negotiations before, and debt forgiveness “will struggle to get approval in the German and Austrian parliament,” Ostwald said. He also pointed out that trading in Greek debt is limited.

The turnover through the Bank of Greece’s electronic secondary securities market, or HDAT, totaled 18 million euros ($20 million) last month through Oct. 27, the central bank’s data show. The volume was 40 million euros in September. Trading peaked at 136 billion euros in September 2004.

“Sometimes when you get these sharp moves it’s more a function of price-marking relative to news flow, positive or negative, rather than representing that there’s been a massive rush into Greek bonds,” Ostwald said.

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