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Saturday, 21 October 2017

Greek bonds hammered again

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Greek bonds are getting slammed again on Tuesday, with 10-year spreads out another 25bp to Bunds on Tradeweb, to +575bp mid-morning in London.

This represents a cheapening of over 100bp from earlier in the month, and spreads haven’t been this wide since February.

Outright 10-year yields meanwhile have leapt over 100bp in the last two weeks to 6.72%, and also haven’t been this high since May.

On a price basis, the 2/33s are trading heaviest, down just over two points on the day. The pressure comes as the ECB/EU/IMF Troika arrives in Athens today to discuss the sovereign’s 2015 budget and associated projections, as well as the possibility of Greece successfully leaving its bailout program.

Paradoxically, while it should be good news for the sovereign, markets have been worried that a Greek exit from its program would remove external oversight of ongoing fiscal and structural reforms.

In the background are also concerns about SYRIZA gaining ground in opinion polls, even if elections are set to be a long way off.

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