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Saturday 20 September 2014

Bonds advance as Europe edges closer to a deal on Greek debt

Published 22/11/2012 | 05:00

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IRISH bonds advanced yesterday, pushing the yield to the lowest level in years, as European leaders said they were close to a deal on Greece.

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The yield on Irish bonds due in October 2020 fell 19 basis points at one stage yesterday to touch 4.47pc, the lowest level since the bonds were first auctioned in January 2010.

Spanish and Greek bonds also rose as optimism that the Greek crisis will be resolved boosted demand for the debt of so-called peripheral nations.

Greek bonds rose for a ninth day as German Finance Minister Wolfgang Schaeuble said the eurogroup is united on the idea of a Greek bond buyback, although some "technical questions" remained.

The bond markets shrugged off the failure by European Union finance ministers to reach agreement on saving Greece and their likely failure to agree a seven-year budget plan.

German Chancellor Angela Merkel said in Berlin that a deal on Greece may come on Monday. Still, she warned that budget talks slated for a summit today may slide into next year when Ireland takes over the EU presidency.

Taoiseach Enda Kenny said in the Dail yesterday that "there are deep divisions between the member states".

A bloc of top-rated creditors led by Germany refused to write off a portion of their aid loans. That stance meant the finance ministers were unable to scrape together enough funds from other sources to help alleviate Greece's debt burden, set to hit 190pc of gross domestic product in 2014.

Mr Schaeuble said that the issue of the Greek funding gap was solvable and possible solutions include reducing interest payments on its bailout loans, suspending payouts through 2020 on its second rescue package, or having the European Central Bank buy €9bn of the country's treasury bills, Bloomberg reported.

Another option is for the EU's bailout fund to finance Greek government purchases of €10bn of its own debt.

Technicalities

French Finance Minister Pierre Moscovici said agreement was close, echoing comments from eurogroup chairman Jean-Claude Juncker, who said talks were stuck on technicalities. "I am very confident we will get there on Monday," Mr Moscovici said.

Greece is increasingly frustrated about the repeated delays in releasing the aid.

"Greece did what it had committed it would do. Our partners, together with the IMF, also have to do what they have taken on to do," Prime Minister Antonis Samaras said yesterday. Mr Samaras will meet Mr Juncker in Brussels today. (Additional reporting Bloom-berg and Reuters)

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