* Investors snap up new Greek 5-year bond at 4.95 pct yield
* Greece returns to market at lower cost than Ireland
* Rest of euro zone market firmer after dovish Fed minutes
By Emelia Sithole-Matarise and John Geddie
LONDON, April 10 Fervent demand for Greece's
first bond sale just two years after it defaulted buoyed
investor appetite for other lower-rated euro zone sovereign debt
Belief that a rate hike by the U.S. Federal Reserve might
not come as soon as some had feared further spurred the
relentless rally in euro area debt, sending borrowing costs back
towards multi-year lows in many of the zone's most vulnerable
A car bomb in central Athens failed to rattle the market, as
20 billion euros of orders were placed for Greece's five-year
bond sale, allowing it to make one of the fastest ever market
returns of a defaulted sovereign.
The country priced a 3 billion euro deal at a yield of 4.95
percent, Thomson Reuters markets service IFR reported.
This was one percentage point less than the 5.90 percent
yield at which Ireland, the first country to come back to
market, sold its five-year bond in July 2012, but slightly below
the 4.90 percent cost for Portugal's sale of similar maturity
paper in early 2013.
"Its a great success for Greece ... and now they have
tangible evidence they can fund themselves in the market,' said
Michael Leister, a rates strategist at Commerzbank.
Ireland too capitalised on demand, offloading 1 billion
euros of 10-year bonds at auction. Portugal is scheduled to hold
auctions this quarter as it looks to exit its EU/IMF bailout
"It [Greece's deal] also bodes well for the periphery in
particular for Portugal which is likely to use this tailwind to
probably go ahead with a bond auction. This is still simply a
reflection of central bank policy and that liquidity is ample."
Portuguese and Spanish 10-year
yields fell 4 basis points on the day to 3.90 and 3.17 percent
respectively. Italian and Irish
equivalents dipped 2 bps to 3.17 and 2.92 percent, respectively.
TOO EARLY FOR SOME
While Greece's return is broadly seen as positive for market
sentiment, many European investors were unable to take positions
in its bonds which are rated deep in junk territory.
"We didn't participate. Given the rating ... it's not really
the turf of a traditional bond investor, even if it's a euro
zone issuer," said Jozsef Szabo, head of Global Macro at
Aberdeen Asset Management.
Other remained unwilling.
"We remain prudent about the underlying debt dynamics of
Greece and its sustainability and preferred not to participate
on this issue," said Sylvain de Bus, a senior fund manager at
asset manager Candriam which has participated in both of
Portugal's previous debt sales.
Banks managing the Greek deal said more than 550 accounts
placed orders for the transaction, but some market participants
said the fact the yields on other Greek bonds were rising was
evidence that not all investment was likely to be new money.
Greek 10-year yields were the only eurozone government bonds
that did not rally on Thursday, rising 6 bps to 5.98 percent.
They still, however, remain below the 6 percent level they
breached on Wednesday for the first time since early 2010.
(Additional reporting by Marius Zaharia; Editing by Andrew