Greek sovereign bond yields and their spreads increased significantly on Friday, standing out from other eurozone bonds which also came under pressure, albeit to a considerably lesser degree.
The yield on Greece’s 10-year benchmark bond climbed 7% to 1.51 percentage points, the highest since May 2020, while the spread to the 10-year German Bund rose to 159 basis points. The five-year bond saw its yield rise 9% to 0.709%, the 15-year yield rose 4% to 1.595 percentage points, and the 30-year paper saw its yield rise from 6% to 1.343%. them on a 20 month high as well.
According to market watchers, Greek bonds were the focus of traders’ concerns on Friday due to expectations of another foray into the Athens market as early as next week and ahead of the new credit rating report on Greece by Fitch Ratings expected next Friday.
Confusion over the maturity of the new issue and the possibility of it being longer than 10 years put additional pressure on the long end of the yield curve.
In particular, Societe Generale estimates that Greece will hit the markets this month with a new 15-year or even 20-year bond, while Citigroup, Danske Bank and JPMorgan anticipate a 10-year debt issue.
Another reason for the pressure on Greek bonds was the sell-off in international bond markets on Thursday, in part due to the 10-year U.S. bond yield surging to a 10-month high, above 1 , 7 percentage point. However, Greece were fortunate enough to escape that sale thanks to their Epiphany vacation, only to come under softer pressure on Friday, with some delay.
The market believes that Greek securities are emerging from a rally in December, with a reduction in spreads, created by the decision of the European Central Bank to include Greece in its bond reinvestment program; the positive impact of the decision now seems to be fading.
On Tuesday, the Public Debt Management Agency released news 13-week treasury bills for 625 million euros, which made it possible to obtain a hedge rate of 1.84 and led to the long-term drawdown of 812.5 million euros, at a negative rate of 0.40%. This compares to a cover ratio of 1.69 and an interest rate of -0.43% recorded in the previous auction of this type on November 3.