* Pricing on Greece debt buyback higher than expected
* Details boost sentiment towards periphery
* Bunds pare gains but US "fiscal cliff" continues to
By Ana Nicolaci da Costa
LONDON, Dec 3 Greek government bond prices
rallied on Monday after details were announced of its debt
buy-back - a central part of a deal to release aid funds to the
economically crippled country.
Yields on other lower-rated debt also fell, though German
Bund futures stuck to gains because of underlying concerns over
U.S. budget talks.
Greece set a smaller discount than expected in pricing buy
backs of each of its 20 series of outstanding bonds. It set a
spread of two percentage points - from a minimum of 30.2 to 38.1
percent and a maximum of 32.2 to 40.1 percent depending on the
"It indicates they really want the swap to succeed," Ricardo
Barbieri, strategist at Mizuho said, referring to the pricing.
"Some investors might be tempted to participate in the swap
because of the ability to simplify their position, should they
wish to maintain exposure to Greece, otherwise an opportunity to
exit completely their positions at a level that is better than
Greek bond prices rose across the strip and
ten-year Greek bonds yields fell 153 basis points
to 14.63 percent.
Spanish 10-year yields were down 9.3 basis
points to 5.25 percent and equivalent Italian borrowing costs
6.6 bps lower at 4.44 percent.
German Bund futures stood just in positive
territory, up 10 ticks on the day at 142.89 after early gains
"(The Greek details) are better than expected. Therefore,
periphery now getting a bid... and that's weighing on Bunds,"
one trader said.
The bond buyback is key to the efforts of its foreign
lenders to put Greece's debt back on a sustainable footing, and
its success would pave the way for the country to get
long-delayed funding to avoid bankruptcy.
Analysts will have to wait to see the final demand for the
buyback to determine its longer-term impact on the market.
Investors must declare their interest by Dec. 7 and the
expected settlement date is Dec. 17.
"The gain in the Bund is just reflecting that the market is
still waiting before taking any strong decision. It's just
wait-and-see behaviour," Patrick Jacq, European rate strategist
at BNP Paribas said.
German Bunds remained in positive territory even as data in
the euro zone improved and despite gains in equity markets.
The contraction in activity at euro zone manufacturers eased
to an eight-month low in November, although a meaningful
recovery still looks a long way off, a survey showed on Monday.
European equity markets rose, also buoyed by improving
manufacturing data from China..
But German bonds, considered safer investments, have
remained underpinned thanks to an impasse in U.S. budget talks,
according to analysts.
Treasury Secretary Timothy Geithner said on Sunday that he
"can't promise" that the United States won't go over the "fiscal
cliff" of tax increases and spending cuts that will be
automatically triggered in early 2013, insisting it is up to
Without a deal, economists fear the U.S. economy could fall
back into recession.
Investors will get the latest insight into the health of the
world's largest economy through manufacturing data later in the
day and jobs numbers on Friday.
Data on Friday will likely show employment growth slowed to
100,000 jobs last month from 171,000 in October, according to a
Reuters poll of economists. U.S. manufacturing data this week is
also likely to suggest a fourth-quarter slowdown is at hand.
"The Bund remains surprisingly well supported given that
we've had a more positive trend in equities in recent days. I
think it's simply because the market is still very uncertain
about what will happen in the U.S. in terms of the fiscal
cliff," Barbieri added.