Greek Bonds Extend Selloff, Pushing Yield Up Most in Two Years Greece’s 10-year (GDBR10) bonds fell for a third day, pushing the yield up by the most in more than two years, on concern the government’s plan to end its bailout early will leave the nation unable to raise funding. The selloff spread today to other higher-yielding markets with Italian rates climbing the most since June. The yield on Greek 10-year securities reached an eight-month high after Alternate Finance Minister Christos Staikouras yesterday reiterated the country’s intention to raise cash by selling seven-year notes. Greek stocks fell the most in six years. German 10- and 30-year yields tumbled to records amid concern the global economy is slowing. “The main factor that is pushing Greek yields higher is the uncertainty, or their plan to exit the bailout early, and the market clearly isn’t cheering for that,” said Jan von Gerich, a fixed-income analyst at Nordea Bank AB in Helsinki. “It’s clear that they are not ready to make it on their own yet. If they need to finance themselves from markets in large volumes that is not going to work with current yields.” Greece’s 10-year yield increased 81 basis points, or 0.81 percentage point, to 7.81 percent at 3:12 p.m. London time. That’s the biggest increase since July 2012. The rate touched 8.01 percent, the highest since Feb. 6. The 2 percent securities due in February 2024 declined 4.435, or 44.35 euros per 1,000-euro ($1,275) face amount, to 71.01. Stocks Plunge The bonds have fallen for five successive weeks amid speculation the government’s plans to hold onto power by ending an international bailout will lead the nation away from austerity plans designed to control the debt and deficit. Greeks stocks slumped with the Athens Stock Exchange Index dropping as much as 10 percent, the biggest drop in six years. It’s headed for its lowest close since August 2013. Greek Reforms The concern is that Greece won’t be able to finance itself at sustainable rates without the support of its regional partners, while the lack of supervision may lead to the country backtracking on reforms agreed with the European Union and the International Monetary Fund. Trading of Greek government debt through the electronic secondary securities market, or HDAT, was 103 million euros yesterday, the highest since Sept. 24, ANA reported. Trading plunged to zero in October 2011 from a peak of 136 billion euros for the month of September 2004. The bonds of the nation that sparked the sovereign-debt crisis in 2009 have lost 2.4 percent in the past week, the worst performer among securities tracked by Bloomberg World Bond Indexes. That has cut their gain this year to 17 percent, the biggest after Portugal’s 20 percent. German bonds returned 8 percent in 2014 through yesterday, the gauges show. Spain’s earned 14 percent and Italy’s made 13 percent. Growth Concerns “This is really being driven by concerns over growth basically everywhere in the world,” said Elwin de Groot, a senior market economist at Rabobank in Utrecht, Netherlands. “Generally we are seeing risk appetite and demand for the more liquid paper and obviously bunds are still the choice there in particular.” Yields slid across the region yesterday as Germany cut its growth outlook and investor confidence fell to the weakest level in two years, fueling concern that Europe’s biggest economy is heading for a recession and increasing pressure on the region’s central bank to implement asset-purchase stimulus, or quantitative easing. “If things continue like they are now, then QE will really be the base scenario,” said de Groot, who expects the bund yield to drop to as low 0.7 percent in the next three months. The median of economist and strategist predictions compiled by Bloomberg is for the rate to end the year at 1.08 percent and rise to 1.14 percent by March. Investors are betting that Germany’s consumer-price growth will be just over half the ECB’s target goal of 2 percent in the next decade, based on the 10-year break-even rate, a gauge of inflation expectations derived from the yield difference between bunds and index-linked securities. Volatility on German bonds was the highest in the euro area today, followed by those of Greece and Portugal, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.
Posted on: Wed, 15 Oct 2014 16:13:43 +0000
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