Greek yields fall on €10.3bn ‘agreement of convenience’ deal

Greece’s government bonds advanced, pushing the cost of borrowing, or the yield, for the Greek state for 10 years below 7% for the first time since November, after its creditors agreed to release aid and committed to ease the nation’s debt.

The yield on Greek notes maturing in July 2017 also slid to a six-month low, while shares rose.

The country won the disbursement of €10.3 billion euros of aid at a meeting of eurozone finance ministers in Brussels that concluded in the small hours yesterday morning.

German bonds declined relative to higher-yielding peers as the agreement helped underpin demand for riskier assets.

While details on a potential debt forgiveness for Greece were left unresolved, the accord helps the region avoid a repeat of last summer’s drama in which disagreements almost led to Greece being pushed out of the euro.

It also means Greece won’t be weighing on market sentiment as the UK referendum on EU membership and Spain’s election approach next month.

The meeting of finance ministers paved the way for the disbursement, but the IMF retreated from its stance for concrete and generous measures on Greece’s debt, allowing creditors to announce a “breakthrough”.

“It seems very much like an agreement of convenience more than anything else,” Peter Rosenstreich, head of market strategy at Swissquote Bank.

“Greece needed the money now - they were already behind on payments.

Europe really needed to show a stable hand” before the June 23 referendum on whether the UK should stay in the EU, he said.

Some eurozone nations including Germany and the Netherlands had resisted the restructuring measures as they are restrained by domestic electorates that have grown weary of helping the Greeks.

“We on the part of the IMF have made a major concession — and I might as well be open about that — we had argued that these debt-relief measures should be approved up front and we have agreed that they will be approved at the end of the programme,” the IMF ’s European department director Poul Thomsen.


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