Greek government bond yields rose to fresh multiyear highs on
Tuesday, driven by swelling concerns over the future of the
country's beleaguered economy ahead of a key meeting of eurozone
finance ministers later in the week.
In early trade, the yield on Greece's two-year bonds climbed to
over 28%-- a record since being issued--while the yield on the
10-year bonds advanced to just over 13%, their highest level in
over two years. Yields rise as bond prices fall.
An inverted yield curve, where shorter-term debt yields more
than longer-dated bonds, signals that investors foresee a very high
risk of default and a strategist at BNP Paribas wrote in a note
that there appears "very little in the way of an imminent deal"
between the country and its creditors.
On Monday, Greece's government issued a decree requiring public
bodies such as state-owned companies and public pension funds to
transfer their cash reserves to the central bank as the country's
cash reserves continue to dry up. This appears to have instilled
little in the way of confidence in the market.
Peter Dragicevich, an economist at Commonwealth Bank of
Australia, said the move simply "highlights the funding strains the
Greek government is under," but it changes little.
"We believe the chances for a deal to be reached at the
Eurogroup meeting on 24 April have significantly lowered in the
past few days," economists at Credit Suisse wrote in a note.
Eurozone finance ministers are due to meet in Riga, Latvia, on
Friday. However, a deal on fresh aid is unlikely to be agreed
before the Eurogroup meeting on May 11, a day before Greece must
pay EUR780 million ($838 million) due to the International Monetary
Fund.
The euro came under fresh pressure Tuesday, which several
strategists also attributed to growing concerns over Greece.
In early trade, the bloc's currency depreciated 0.7% against the
dollar to just over $1.0660.
Since the start of the year, the euro has fallen close to 12%
against the buck, though this move has largely been driven by
dollar strength as a result of expectations that the U.S. Federal
Reserve is paving the way for an interest-rate increase, while the
European Central Bank continues to move in the opposite
direction.
Higher interest rates broadly make a country's currency more
attractive.
Back in debt markets, yields on German government bonds,
commonly considered one of the safest assets during times of
volatility, have hit record lows practically every day for the past
week.
On Tuesday, the yield on the 10-year German bond, or Bund, was
just 0.074%, a shade off its all-time low but fast approaching
negative territory. Bunds with maturities right out to February
2024 already trade with a yield of less than zero.
In European stock markets on Tuesday, some upbeat earnings
helped to offset the Greek concerns, sending the Stoxx Europe 600
1.1% higher in early trade. On Friday, and largely due to Greece,
the index suffered its worst single -day selloff in around three
months.
In commodity markets, Brent crude declined 0.9% to $62.90 per
barrel. Gold was broadly flat on the day at $1,194.20 per troy
ounce.
Write to Josie Cox at josie.cox@wsj.com
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