* Aid optimism pushes Greek yield to post restructuring low
* Spanish yields down after auction kicks off 2013 funding
* Bond markets still pricing in Spanish bailout request
By William James and Marius Zaharia
LONDON, Nov 22 Greek bond yields fell to their
lowest since the country's debt was restructured in March as
optimism that international leaders will agree on how to reduce
the burden further dominated Thursday's quiet trading.
After lenders failed repeatedly to agree a plan to tackle
Greece's sky-high debts, European commissioner Olli Rehn allayed
concerns by saying euro zone ministers should be able to sign
off on another tranche of aid on Monday.
The expectation that Greece will soon get more cash pushed
down Greek yields for the 10th consecutive trading day,
supported by continuing speculation that rescue funds could be
used to buy back bonds from private investors.
The February 2023 bond yield dropped by more
than half a percentage point to an intraday low of 16.164
percent, its lowest since the bond was issued as part of a debt
restructuring in March.
"The idea that they could get more funding and buybacks is
supporting," said Nordea chief analyst Niels From, although he
cautioned that the scale of the move was not unusual for the
Trading volumes were low across the euro zone as many
participants stayed away with U.S. markets shut for
Nevertheless, Spanish debt rallied after the country
received strong bids for its three-, five- and nine-year bond
sale which raised an above-target 3.88 billion euros.
Ten-year Spanish yields fell 6 basis points on
the day to 5.67 percent, continuing to recover after trading
above 6 percent at the start of the week.
Having already met its 2012 fundraising target, the proceeds
of Thursday's sale kicked off its 2013 funding campaign - a
burden that Madrid is likely to struggle to carry without
Markets have rallied since July, coming back from their
weakest levels since the launch of the euro on expectations
Spain will eventually request aid and enable the ECB to buy its
"It's a clear reflection that sentiment in Spain has
improved markedly," RIA Capital Markets bond strategist Nick
"They are already funded for 2012 and the market is betting
that Spain will ask for a bailout early next year when they face
a (wall of issuance). On top of that, markets seem pretty
sanguine about Greece and they think somehow, by hook or by
crook ... they're going to get their money."
Merrion Stockbrokers chief economist Alan McQuaid said
comments from Angela Merkel supporting a likely deal for Greece
next week would lead to further gains for fringe euro zone bonds
in the near term. McQuaid said his firm would be buying such
paper and selling higher-rated bonds in the coming days.
He expected Spain to ask for help possibly as early as next
week once elections in the wealthy Catalonia region over the
weekend are out of the way.
"I expect Greece will get a deal next Monday given Merkel's
comments and ... Spain might start looking for a bailout next
week," McQuaid said, adding that a post-bailout rally could
"easily" take 10-year Spanish yields below 5 percent.
German Bund futures were 4 ticks higher at 142.21,
having fallen 83 ticks in the previous two sessions. Charts
pointed to further losses for Bunds in the near future as they
broke below their 100-day moving average at 142.34.