(Updates with later prices, fresh quotes)
By John Geddie and Marius Zaharia
LONDON, April 11 Greek bond yields rose on
Friday as investors booked profits on the rally that preceded
Greece's return to debt markets, although its new five-year bond
held up relatively well in early trading.
Athens, which had been exiled from capital markets for four
years and was bailed-out to the tune of 240 billion as its
economy faltered, received massive over-subscription for its
first sale of a new bond since before its bailout in 2010.
The transaction buoyed other euro zone government bond
markets on Thursday, but the new bonds faced a difficult birth
as trading started on Friday with investors losing their
appetite for riskier assets.
"The euphoria is fading after yesterday's deal," said Owen
Callan, a senior analyst at Danske Bank. "People are taking
stock of the fact while its great that Greece regained some sort
of access, there is still a very long road to recovery for
Greece's 10-year bond yields rose 24 basis
points to 6.21 percent while other euro zone bond yields fell
and global stock markets tumbled. Greek yields had fallen
beneath 6 percent for the first time since March 2010 before
Athens sold the new bonds on Thursday.
Nevertheless, banks managing the sale of Greece's new
five-year bonds said they were trading over-the-counter at
yields below the 4.95 percent at which they were sold, just
after they were released to trade at 0700 GMT.
"The general market tone is weaker today but even with that
the new bonds are holding up," said Andrew Salvoni at Morgan
Stanley, one of the bankers managing the syndicated sale on
Other market participants were reserving their verdict on
the deal until prices appeared on trading screens, which is
expected later on Friday.
Athens received 20 billion euros of orders for its 3 billion
euro bond sale. The hefty demand led brokers to mark the new
five-year bonds at around 4.80 percent yield before the deal
priced on Thursday, expecting the bonds to rally considerably
once secondary market trade began. Yields fall as the price of
However, some remained sceptical about demand for the deal.
David Schnautz, a credit strategist at Commerzbank, said the
20 billion euros of orders for the new bonds was not a true
reflection of demand, as investors were prone to inflate their
orders to make sure they received a decent allocation.
"(As an investor) you have to shoot very high to get what
you actually want," he said.
Others said the final pricing was too aggressive, which was
part of the reason Greek bonds sold off on Friday.
"It priced at least 25 bps below initial expectations. They
took advantage of the big order book and probably they revised
the pricing too much," said Alessandro Giansanti, senior rate
strategist at ING.
"Some investors are (selling) thinking it came at levels
that were too tight."
The Greek finance ministry said on Thursday a third of the
bonds were allocated to hedge funds, investors notorious for
having short-term trading strategies, leading some market
participants to question why this was the case if demand was so
(Editing by Peter Graff)