Greece’s bonds climbed, sending 10-year yields down by the most since October, amid easing concern that a victory for the anti-austerity Syriza party in this month’s elections would result in the nation leaving the euro region.
Three-year notes rose a third day and Greek stocks rallied after Syriza’s Alexis Tsipras said in a Jan. 10 interview with Real News that a government led by his party would repay debt due in March and keep Greece in the currency bloc. The latest polls put the opposition party ahead, but short of a level required for an absolute majority. Amid signs contagion from Greece is being contained, Portugal hired banks to sell 10- and 30-year bonds, according to a person familiar with the matter.
“People are more relaxed that it won’t be the end of Europe if Syriza wins the elections,” said Daniel Lenz, lead market strategist for the euro area at DZ Bank AG in Frankfurt. “The risk of a path that would lead to a Grexit may have been a little bit exaggerated,” he said, referring to concern that Greece would leave the euro bloc. “Also, if there has to be a coalition, Syriza can’t act in a way that the market had feared.”
Greek 10-year yields fell 68 basis points, or 0.68 percentage point, to 9.47 percent at 4:43 p.m. London time, the biggest drop since Oct. 17. The 2 percent security due in February 2024 rose 2.99, or 29.90 euros per 1,000-euro ($1,183) face amount, to 63.79. The three-year rate tumbled 1.54 percentage points to 11.79 percent, having dropped 2.29 percentage points in the previous two days.
Tsipras Speech
Tension caused by Greece’s election is starting to ease after a bond-market selloff last week pushed the 10-year yield to its highest closing-market rate since July 2013, at 10.68 percent. Prime Minister Antonis Samaras has said the Jan. 25 vote will determine the nation’s euro membership. Only Samaras is talking about a Greek euro exit, Tsipras said in a Jan. 10 speech.
Greece’s ASE Index (ASE) of equities climbed 3.8 percent, posting its biggest two-day advance since November, after closing at its lowest level in more than two years on Jan. 8. National Bank of Greece SA and Alpha Bank AE contributed the most to today’s gain, rising more than 5 percent.
Separate polls last week by Kapa Research and Alco put Syriza’s lead over Samaras’s New Democracy party at 2.6 percentage points and 3.2 percentage points, respectively, both little changed. The Kapa poll for yesterday’s To Vima newspaper gave Syriza 28.1 percent support to 25.5 percent for New Democracy.
Contagion Controlled
Greece is scheduled to repay more than 5.6 billion euros of debt in March, up from the 1.4 billion euros it needs to pay this month and 2.8 billion euros that come due in February, according to Bloomberg data.
While they’re up today, Greek bonds made a loss of 22 percent in the six months through Jan. 9, according to Bloomberg World Bond Indexes, as the prospect of a general election rekindled memories of the debt crisis that pushed Greece and euro-area peers including Ireland and Portugal to accept international bailouts.
Now the European Union has in place its 500 billion-euro European Stability Mechanism, a full-time aid fund, Greece has been largely ringfenced, enabling Portuguese securities to return 6.3 percent in the past six months. Any political turmoil in Greece following the election is no longer a threat to the wider stability of the euro area, Michael Fuchs, a senior lawmaker from German Chancellor Angela Merkel’s party, said last week.
Portuguese Sale
Portugal mandated seven banks as joint lead managers for its sales of 10- and 30-year bonds, which will begin in the near future, according to the person familiar with the matter, who asked not to be identified as they’re not authorized to speak publicly.
The yield on the nation’s current 10-year bond, due in February 2024, fell four basis points to 2.60 percent today, while that on similar-maturity Spanish bonds declined eight basis points to 1.64 percent. The rate on German 10-year bunds, the euro area’s benchmark, were little changed at 0.48 percent.
Italy is due to sell 7 billion euros of bonds tomorrow, while the Netherlands, Austria, Germany and Spain are also scheduled to hold auctions this week. Spain and Slovenia may hold sales via banks, according to a Jan. 8 report from Commerzbank AG, whose analysts estimated euro-area governments may sell more than 30 billion euros of debt this week, including a Portuguese syndication.
