Markets take it on chin as Greece misses €1.6bn IMF repayment

The lack of any 11th-hour breakthrough in talks between Athens and key eurozone leaders meant markets were little riled by the failure of Greece to meet the repayment to the IMF due yesterday.

Markets take it on chin as Greece misses €1.6bn IMF repayment

Bond and currency markets instead continued to focus on the weekend referendum called by Greek prime minister Alexis Tsipras as his Syriza party continued to urge Greeks to reject the conditions of the IMF and EU creditors.

German chancellor Angela Merkel ruled out further negotiations with Greece ahead of the vote, signalling that the so-called official creditors — the EU, IMF, and the ECB — are involved in appealing to Greek voters above the head of Mr Tsipras, analysts said.

There was some lingering attention to the “slim possibility” that Athens would make its €1.6bn payment to the IMF by the deadline of late yesterday, but markets were quiet for a second day after the momentous events of Monday when Greek banks shut their doors, said Owen Callan, fixed income strategist at Cantor Fitzgerald Ireland.

That was reflected in bond market trading. The Irish 10-year bond ended little changed at 1.62%, while the yield on the Portuguese bond, which had leapt on Monday, eased back slightly to 2.96%. Spain’s 10-year bond also edged lower to 2.32%, while the yield on Italy’s 10-year bond also ended little changed on the day, at 2.28%.

The euro continued to fall against sterling, to just above 70p, a move which could help Irish exporters to sell more goods and services into Britain.

“Markets are heartedly sickened by now by speculation surrounding the talks between the creditors and Greece,” said Donal O’Mahony, global strategist at Davy Stockbrokers.

“It is clear that the EU authorities have lost so much trust, and are confident of winning the referendum. All is on hold ahead of the referendum.”

Bookie Paddy Power said it had lengthened its odds on Greece leaving the eurozone this year to 13/8 from 2/1, suggesting that Greek voters will back the creditors’ terms on Sunday.

It makes it 2/5 (70% probability) that the Greeks will agree to the latest round of conditions proposed by its creditors, “while an out and out rejection is available at 7/4”, said the bookie.

Ratings agency Standard & Poor’s said that, following the imposition of capital controls,“the default of the Greek banks is a virtual certainty unless unexpected additional external” assistance is provided.

“We understand the [Greek] finance minister could further extend, or shorten, bank closures,” S&P said.

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