Greek bond yields edge lower on funding deal hopes
Greek bond yields edged lower on Monday amid hopes the country’s policymakers and its creditors can secure a funding deal to avert a credit default.
Weekend talks between lawmakers from both sides came after the Greek government sent its list of reforms last Friday, with a view to unlocking the disbursement of the remaining €7.2bn of the bailout funds.
On Monday, lawmakers were still locked in discussions with Greece in search of a compromise. As of 08:37 the yield on the country’s three-year sovereign bonds ticked 28 basis points lower to 19.585% while the 10-year bond yield was down by 7.4 basis points at 10.596%.
According to reports, Greece’s list includes measures aimed at raising €3bn in fresh revenue this year through improvements in tax collection and by fighting against tax evasion, as well as some tax increases.
That said, the list “still lacks details in some areas that have caused concerns during previous discussions, and it still fails to include progress in labour market and pension reforms”, said Barclays, who thinks a decision from EU ministers is likely this week.
The pressure was on however as Greece was fast running out of cash before having to meet a €450m loan payment due to the International Monetary Fund next week, unless the country could unlock fresh funding from its creditors.
At the end of last week, rating agency Fitch downgraded Greece to a "substantial credit risk", citing "uncertain prospects of timely disbursement from official institutions". While Fitch expects the Greek government to survive the current liquidity crisis, they believe Greece’s outlook remains highly uncertain.
In the currency market, the euro slipped 0.3% against the US dollar to switch hands at $1.0879 early Monday as market participants keep a watchful eye on developments out of Brussels. All eyes are squarely on Greek Prime Minister Alexi Tsipras and his delegation to seal a deal.