* Yields on new Greek bond above 5 pct on Friday
* Bond was issued Thursday at 4.95 pct
* Was first Greek bond after four years locked out of market
* Yields on older Greek bonds also jumped
(Adds RIC for new bond, new comments, updates prices)
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, with even its sought-after new
five-year bond succumbing to selling pressure.
Athens, which had been locked out of capital markets for
four years and was bailed out to the tune of 240 billion euros
($333 billion) as its economy faltered, received bids seven
times the amount in its first sale of a new bond since before
its bailout in 2010.
The transaction had 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
stomach 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 (that) while its great
that Greece regained some sort of access, there is still a very
long road to recovery for Greece."
Yields on the new Greek bond traded above 5 percent on
Friday, compared with the 4.95 percent level at
which it was issued. It had traded at lower yield levels earlier
in the day, but that prompted immediate profit taking from
Thursday's buyers. Yields rise as the value of the bond falls.
Although its economy looks to have turned a corner, Greece
is still seen by many as a weak link within the euro zone. The
government holds only a two-seat majority in parliament, and
early elections are a constant risk, with the anti-bailout
Syriza party leading in opinion polls.
Many investors still fear social unrest as unemployment,
though falling, remains more than twice the euro zone average at
almost 27 percent. On Thursday, a car bomb exploded outside the
Also, Greece's debts are still 1.7 times its economic
output. The International Monetary Fund said Greece was likely
to need more financing help from the euro zone in the next two
year despite its market comeback.
"The government ... is fragile, and if the economic recovery
falters then this fragility could play out even further," said
Thede Ruest, a portfolio manager at ING asset management.
Yields on older Greek bonds jumped, with the 10-year
yield rising more than a third of a percentage
point to 6.32 percent.
In the run-up to the sale, Greek 10-year yields had fallen
to four-year lows below 6 percent.
"It's quite obvious that many of the guys that bought the
bond were not the buy-and-hold type. They were just fast money,"
one trader said.
At their peaks following a March 2012 restructuring that
imposed losses on private debt holders, Greek bonds yielded
above 30 percent.
Other euro zone bond yields rose as well on Friday, while
global stock markets tumbled. Given the bigger picture, some
market participants said the new Greek bonds were doing well to
sell off less than their longer-dated peers.
"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.
Athens received 20 billion euros of orders for its 3 billion
bond sale. Demand was equal to about two thirds of the size of
its entire bond market and the volume of more than 100 days of
Greek bond trading on electronic platforms.
The surprisingly hefty demand led brokers to mark the new
five-year bonds at around 4.8 percent yield before the deal
priced on Thursday, expecting the bonds to rally considerably
once secondary market trade began.
Friday's moves caught them on the wrong foot.
David Schnautz, a strategist at Commerzbank, said the vast
orders for the new bonds were not a true reflection of demand,
as investors were prone to inflate their orders to make sure
they received a decent allocation.
"The ... demand that the bond attracted yesterday is no
longer there today," said Lena Komileva, managing director at G+
Economics. "It remains the case that Greece is a troubled
borrower struggling to attract genuine investor interest."
Some analysts 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 in the market
to question the wisdom of that high allocation, given such
($1 = 0.7204 euros)
(Editing by Peter Graff)