Greek Yields Drop to 4-Year Low, Stocks Rally Amid Troika Talks

By Neal Armstrong and Christos Ziotis  Feb 26, 2014 6:41 PM GMT+0200

Bloomberg

Greece’s bonds jumped, sending yields to a four-year low, and stocks climbed on speculation the country will reach an agreement with international creditors to ensure its bank-recapitalization requirements are manageable.

Greece’s 30-year yields dropped below 7 percent for the first time since April 2010 as central bank Governor George Provopoulos met with officials from the European Commission, International Monetary Fund and European Central Bank in Athens. Stocks closed at the highest since July 2011 after Greek state natural gas company Depa SA and Russia’s OAO Gazprom reached an agreement on prices for gas supplied to Greece.

“We see equities reacting to the four-year low in Greek government bond yields and on speculation that the recapitalization needs of Greek banks are manageable,” said Thanassis Drogossis, head of equities at Athens-based Pantelakis Securities SA. “Also, the reported deal between Greece and Gazprom for the reduction in natural gas supply prices is good news for the Greek manufacturing sector.”

Greece’s assets are winning fans more than four years after its debts sparked a financial crisis in the euro area that left the nation requiring two bailouts to rescue it from insolvency. A European Commission report yesterday forecast that the Greek economy would expand in 2014 after six years of contraction.

The 1 1/2-hour meeting between Provopoulos and the so-called troika ended at about 4:30 p.m. local time without an agreement on how much extra capital Greek lenders will need, according to a central bank official, who asked not to be named in line with policy. Provopoulos will meet the troika again next week, the official said.

Stocks Rally

Ten-year bond yields fell 17 basis points, or 0.17 percentage point, to 7.19 percent at 4:35 p.m. London time, and touched 7.18 percent, the lowest since May 2010. The 30-year yield was at 7.01 percent after dropping as much as 18 basis points to 6.92 percent.

Greece’s ASE Index (ASE) rallied 3.3 percent, taking its two-day gain to 6.9 percent, the most since May. The gauge has jumped 12 percent this year, exceeding the 2.9 percent increase for the Stoxx Europe 600 Index. Greek stocks have posted the third-biggest advance of all 24 developed markets tracked by Bloomberg in 2014, trailing only Denmark and Ireland.

The nation is in a standoff over the extent of the lenders capital requirements, the Financial Times reported Feb. 24. The IMF may publish a figure of 20 billion euros if Greece sticks to an estimate of 6 billion euros, the report said.

Publication of a BlackRock Inc. asset-quality review and stress tests of Greek lenders, originally due in December, will probably be come toward the end of next week, the central bank official said after today’s meeting.

To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Christos Ziotis in Athens at cziotis@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net