* Greek yields extend recent falls
* Portugal buys back 50 mln euro of 2015 bonds
* Buyback is second such move so far this year
By Emelia Sithole-Matarise
LONDON, March 18 Greek yields fell sharply on
Tuesday after Athens and international lenders struck a deal to
unlock the next tranche of emergency loans following protracted
The deal comes after six months of talks between Greece and
its lenders - the European Commission, the European Central Bank
and the International Monetary Fund - on reforms Athens must
implement to get the next cash instalment.
Greek Finance Minister Yannis Stournaras confirmed an
earlier Reuters report that a deal to unblock the next bailout
funds had been reached.
"It's (bailout deal) another catalyst in the overall picture
and adds to sentiment which has been very positive since the
start of the year," said Michael Leister, a strategist at
"All these bits and pieces fit together and reflect the
overall sense that investors are hunting for yield and are
probably comfortable dipping their toes back into the Greek
Greek 10-year yields slid 18 basis points to
6.87 percent and 30-year bonds yielded 6.70 percent
, down 17 bps on the day. They resumed a downward
trek that was interrupted last week as the bailout review talks
looked set to drag on until the end of the month.
While junk-rated Greek bonds still offer higher yields than
the rest of the euro zone, improved sentiment in peripheral euro
zone debt has driven euro zone yields across the board to
multi-year lows as concerns over the debt crisis have eased.
Volumes have also been picking up in a bond market that most
investors deserted in 2010 when the debt crisis erupted. By
March 11, investors had traded some 888 million euros of Greek
government bonds - almost 60 percent of the total for the whole
of 2013, Greek central bank data showed. This compares with 680
million in 2012, when Greek debt was restructured.
The improved market tone is also leading some Greek
officials to consider issuing bonds earlier than the second half
of the year Athens has hitherto flagged.
Yields on equally junk-rated Portuguese bonds reversed some
of their earlier falls after Lisbon bought a
smaller-than-expected 50 million euros of a 2015 bond in a
reverse auction aimed at fostering confidence the country can
fund itself after it exits its international bailout this year.
The amount repurchased was miniscule compared with the 1.32
billion euros of October 2014 and October 2015 Portugal bought
back in a similar reverse auction last month in a move aimed at
easing its redemption burden. Some analysts, however, said the
small size probably signalled that the treasury was now
comfortable with its redemption profile and did not need to buy
a significant amount of the bond.
"Overall this can be interpreted as a sign of strength that
they didn't feel the need to buy back a higher amount because
they don't see the redemption risks," Leister said.
"It also might be that the price market participants were
willing to accept for the bonds was simply too high."
The rejection late on Monday by Portugal's opposition
Socialists of an agreement with the government on a long-term
plan to reduce the budget deficit was seen having little impact
for now on demand for the country's bonds.
Portuguese 10-year yields were last 4 bps down at 4.53
percent, having fallen as low as 4.48 percent
earlier, while two-year yields were flat on the day at 1.49
"In general the fundamental tone is improving. We've seen an
array of positive news from rating agencies and everybody awaits
Portugal to come back to the market and leave the troika
(bailout) programme later in the year. That is the key event for
Portugal," said Peter Goves, a strategist at Citi.
Portugal's 78 billion euro bailout by the EU and IMF expires
in May. Questions remain, however, as to whether Portugal can
make a clean break from the aid programme agreed in 2011 and do
without a safety net, in the form of a precautionary credit
line, in case it gets into financial trouble.
Other euro zone bond yields were a touch lower after the
German Constitutional Court, as widely expected, upheld a 2012
verdict giving the greenlight to the euro zone's bailout fund,
the European Stability Mechanism.