Greek Bonds Enjoy Respite; Government Buybacks Confirmed
By Mark Brown and Alkman Granitsas
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Yields on shorter-term Greek government bonds fell for the first time in nearly three weeks Thursday, in line with the better performance of bonds from other peripheral euro-zone sovereign borrowers.
Late Wednesday the Greek finance ministry confirmed that the government had bought back EUR2.5 billion of its bonds in the secondary market since the start of the year, as part of a cash-management exercise ahead of upcoming redemptions.
Traders didn't directly link this news to the fall in yield, although one did say that it might have prompted some market participants to cover short positions in Greek debt.
Late last year the Greek finance ministry approved a plan to repurchase up to EUR3 billion in government debt, as part of the government's efforts to better manage its small cash surplus of about EUR7 billion.
The buybacks only involve bills and bonds that are maturing within the next six months and are trading at a slight discount to their face value, a person familiar with the purchases said.
The repurchases will have had a positive but minor impact on the total stock of Greek debt, HSBC analysts said in a note to clients.
"Although positive, such transactions have limited scope to reduce public debt," which stood at 142.8% of gross domestic product at the end of 2010, HSBC said.
The HSBC comment also noted that Greece has limited funds available for such operations because payments it receives under its EUR110 billion bailout by the European Union and International Monetary Fund are meant to cover the county's deficit and its bond repayments.
"If they're buying back opportunistically from willing sellers, a couple of billion [of euros worth of purchases] isn't going to make much difference," said a strategist at another bank. "And they've got to find the money [to buy bonds] from somewhere."
Yields on two-year Greek bonds, which have been leaping higher on a daily basis this week on persistent fears that the country will have to restructure its debt at some point, were just over 1.5 percentage points lower at 23.84%, according to Tradeweb.
Greek five-year yields were 18.5 basis points lower at 21.35%, although Greek bonds maturing in five years or more still price in around a 50% loss of principal to investors who bought them at face value, according to ING.
Market participants cautioned against reading to much into the trend.
"We're seeing very few trades, especially in Greece, and a generally better tone across the board," said one trader.
***
Da leggere.