* Greek five-year bonds fall below 4.95 pct issuance level
* Bond's market performance key for success of future sales
* Italy raises 20.6 bln in bumper BTP Italia sale
(Updates with new prices, Italian debt sale, adds fresh
By Marius Zaharia
LONDON, April 17 The yield on the first bond
Greece has sold since its 2012 default dipped just below its
issuance level on Thursday as Athens rejoined a rally in
peripheral debt markets after a brief period of selling
The five-year bond, which drew demand
almost seven times its size a week ago, faced a tough market
debut as investors used the landmark sale as an opportunity to
book profits on the euro zone's best performing bonds this year.
The immediate selling pressure after one of the fastest
market comebacks ever from default by a sovereign raised worries
that Greece's access to private funding remained at the mercy of
come-and-go hedge funds.
The dip back to just below the 4.95 percent issuance yield
from levels above 5.1 percent it hit earlier this week suggested
that Greece, which is under a 240 billion euros ($331.35
billion) EU/IMF bailout package, might after all be able to
count on a more stable investor base in the future.
A strong market performance of the bond, which last traded
12 basis points lower on the day at 4.84 percent, was key to
attracting investors to any future Greek bond sales.
"Probably there were a couple of guys on board who expected
to have a quick gain and got out ... maybe a bit too early,"
said Padhraic Garvey, head of investment grade debt strategy at
ING in Amsterdam.
"Ideally you want this bond to trade 4.75 or even 4.5
percent to build confidence. You don't want the yield to go up
because it leaves a bad taste in the mouth and reduces the
chances of success for other deals."
In a further confirmation of improving investor sentiment
towards the euro zone's weakest link, National Bank of Greece
prepared to be the fourth Greek lender to tap
international markets through a share offering on Wednesday.
Analysts said Greek yields fell in line with moves in other
lower-rated euro zone bond markets. Yields on Italian, Spanish,
Portuguese and Irish bonds traded close to multi-year or even
record lows on Thursday.
The possibility that the European Central Bank may
eventually have to fight low inflation with asset purchases - or
quantitative easing (QE)- increasingly outmuscled any other
market drivers for peripheral debt.
Greek 10-year yields last traded at 6.21
percent, having risen from four-year lows of 5.85 percent to
just below 6.50 percent in the days after Thursday's bond sale.
Greek yields have dropped some 250 bps so far this year -
one of the fastest falls in the world.
"The rally in peripheral bond markets continued unabated
this week and I don't see why Greece should go against the
tide," said Mathias van der Jeugt, a KBC strategist in Brussels.
Demand for the euro zone's high-yielders was on show in
Italy, which raised a total of 20.6 billion euros of BTP Italia
inflation-linked bonds. That was just shy of a previous record
set last November by a similar bond in what was the largest
single bond sale by a European government.
"The explanation (for the large amount) is quite simple.
People are now waiting for QE from the ECB," said Jussi
Hiljanen, chief fixed income strategist at SEB in Stockholm.
($1 = 0.7243 Euros)
(Reporting by Marius Zaharia; Editing by John Stonestreet)