Greek bonds declined, pushing 10-year yields to the
highest in seven weeks, as opinion polls before next weekend’s European Parliament elections suggest
Greece’s governing coalition is losing support.
Italian bonds fell, with yields rising the most in seven months having earlier dropped to a
record. Irish and Spanish securities also reversed gains that had pushed yields to the least since Bloomberg began collecting the data. Support for Prime Minister Antonis Samaras’s coalition partner Pasok, which dominated Greek politics for three decades, plunged to sixth place with just 5.5 percent of the vote in a recent poll as voters blame the party for the country’s economic meltdown.
“Risks in Greece are still largely underestimated” so the selloff in bonds could continue, said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in
London. If the outcome of the European Parliament elections “has an impact on the next steps for debt sustainability then it could also spill over to other markets in the periphery.”
Greek 10-year yields rose 49 basis points, or 0.49 percentage point, to 6.80 percent at 2:30 p.m. London time after climbing to 6.85 percent, the highest level since March 28. The 2 percent bond maturing in February 2024 dropped 2.98, or 29.80 euros per 1,000-euro ($1,367) face amount, to 75.415.
Investment Concern
The prospect of lawmakers from Pasok, led by Deputy Prime Minister
Evangelos Venizelos, withdrawing their support for the coalition could deter the foreign investors helping to fuel the recovery, according to
Megan Greene, chief economist at Maverick Intelligence and a columnist with Bloomberg View in London.
“If there were snap elections and investors were spooked by the prospect of Syriza being the negotiator for Greece, it could really hurt the Greek recovery because it’s so fragile,” Greene said in a telephone interview. Syriza is the opposition party that rejected the terms of the nation’s international bailout.
Germany’s 10-year yield dropped three basis points to 1.33 percent, the lowest since May 20, 2013. The rate on
Belgium’s five-year notes dropped one basis to 0.72 percent after being as low as 0.704 percent. Italy’s 10-year yield rose eight basis points to 3 percent after dropping to 2.885 percent, the lowest since Bloomberg began collecting the data in 1993.
Reports today showing uneven growth across the euro region and inflation at less than half the
European Central Bank’s target boosted the case for more stimulus.
Italian Economy
The Italian economy shrank 0.1 percent from the previous three months. Economists in a Bloomberg survey had forecast growth of 0.2 percent.
Expansion (GRGDPPGQ) in Germany quickened to 0.8 percent from 0.4 percent, beating economists’ forecast for a 0.7 percent increase. In
France, GDP was
unchanged, while it contracted in
Portugal and the Netherlands.
Euro-area growth was 0.2 percent, half the median estimate of economists surveyed by Bloomberg. Consumer prices in the region rose 0.7 percent in April from a year earlier, less than half the ECB’s 2 percent target.
“This should be the final nail in the coffin for those who are doubting whether the ECB will do something,” said Jan von Gerich, a fixed-income strategist at Nordea Bank AB in Helsinki. “The market is getting quite sure that the ECB will deliver more easing. Maybe that will weaken the impact to some extent” and limit further declines in yields, he said
The rate on French 10-year bonds dropped two basis points to 1.79 percent after sliding to 1.78 percent, the least since May 3, last year. The yield on
Spain’s 10-year (GSPG10YR) debt rose six basis points to 2.92 percent after declining to a record 2.83 percent.
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