Debt yields fall as euro exit risks diminish

Julian Harris
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YIELDS on Greek government 10-year debt fell to their lowest rate since August 2011 yesterday, as the struggling Eurozone state’s bonds continue to strengthen.

Bond prices – which move conversely to yields – have been on the up since late July, with recent comments appearing to strengthen the Greek position.

Investors increasingly see German Chancellor Angela Merkel as being determined to keep Greece in the Eurozone, thus reducing its risk of a messy default. Her finance minister Wolfgang Schaeuble said over the weekend: “I think it will not happen that there will be a state bankrupt in Greece.”

Greek yields fell 48 basis points yesterday, ending at 17.56 per cent.

As the long-term trends shown on the charts show, yields have fallen across troubled Eurozone states during the summer, although Spain’s level bucked the trend yesterday, rising 19 basis points.

Markets remain on edge over Spain’s willingness to officially accept a full bailout package. Yields have been helped to ease in recent weeks by the European Central Bank’s (ECB) pledge to buy the country’s bonds if it requests aid. Eurozone officials briefed yesterday that a Spanish bailout may come as soon as next month.