Greek Yield at 2015 Low Shows Investors Sanguine Before Election

The last time Greece voted on a new government, it prompted months of financial turmoil amid speculation the nation would fail to secure new funding and exit the euro zone. This time, bond markets show traders foresee a calmer scenario.
With opinion polls split three days before parliamentary elections, Greek bonds advanced, pushing 10-year yields to the lowest this year. The yield on Greek securities due in July 2017 slid 34 basis points to 11.06 percent.

“The composition of the Greek government post the election result is not easy to predict,” said Lyn Graham-Taylor, a London-based rates strategist at Rabobank International. “However, we think that the impact of this uncertainty on euro-zone debt markets will be limited. With Greece currently being under the umbrella of a bailout program, we see the wider fallout from the election result as being limited.”
Former Prime Minister Alexis Tsipras stepped down on Aug. 20 after eight months in power, seeking a fresh mandate following the political turmoil resulting from his government’s signing of a third bailout agreement with Greece’s creditors in August. Polls suggest neither of the two leading parties will win an absolute majority that would allow them to form a government without allying with a less-popular party.

Greek Election Poll of Polls (as of Sept. 14)

The yield on Greece’s 10-year bonds fell 20 basis points, or 0.2 percentage point, to 8.37 percent at 4:47 p.m. London time, and touched 8.33 percent, the least since Dec. 23. It surged as high as 19.58 percent in July, as Tsipras struggled to negotiate funding to prevent a default on the country’s debt. The price of the 3 percent note due in February 2025 was at 69.085 percent of face value.

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