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Greek bonds drop with stocks after Syriza win

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A woman waves a Greek flag during a speech by the leader of Syriza left-wing party Alexis Tsipras outside Athens University Headquarters, Sunday, Jan. 25, 2015

A woman waves a Greek flag during a speech by the leader of Syriza left-wing party Alexis Tsipras outside Athens University Headquarters, Sunday, Jan. 25, 2015

AP

A woman waves a Greek flag during a speech by the leader of Syriza left-wing party Alexis Tsipras outside Athens University Headquarters, Sunday, Jan. 25, 2015

Greek bonds fell with stocks and bank debt as a decisive election victory for the Syriza party set up a showdown with creditors over the country's financing needs.

The bonds declined for the first time in four days, having rallied last week as the European Central Bank (ECB) announced a bond-buying programme to boost the euro-area economy.

Greece's ASE Index of equities dropped 3.2pc, erasing its gain this year. Debt issued by Alpha Bank and Piraeus Bank also slid.

All three asset classes were above their 2015 lows, and contagion beyond Greece was limited after concern eased that a Syriza victory would trigger a euro exit.

"If the confrontation between the EU and the Greek government on getting additional funding, which is urgent in the short term, doesn't yield any fruit, we can easily exceed the yield levels we've seen," said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers in London.

"Yields can move even higher if then the market starts to price in an imminent risk of defaulting," he said.

Greek 10-year yields rose 68 basis points to 9.09pc or more than eight times Ireland's borrowing costs. The rate tumbled more than one percentage point in the previous three days as the ECB outlined its programme of sovereign-debt purchases, while saying Greece wouldn't immediately be included in the plan.

Piraeus Bank led losses on the ASE Index with an 18pc decline. Its €500m of three-year bonds fell 2.3 cents on the euro to 82.9 cents. Alpha Bank's €500m of notes issued in June dropped 2.3 cents to 82.8 cents.

Irish Independent