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Yields on Greek government debt fell to their lowest level in more than two and a half years on Friday, after a deal to unlock the next disbursement from its bailout programme earlier this week opened the door to debt relief talks.
Yields on the government’s 10-year bonds dropped more than 30 basis points (0.3 percentage points) after the agreement was secured on Tuesday. (Yields fall when prices rise.) After two days of quieter trading, they fell another 9.1bps today to 5.728 per cent, their lowest level since September 2014.
The market for Greek government bonds is relatively small, with the vast majority of the government’s debt held by creditors in the EU and IMF. Nevertheless, the falling yields still point to improving sentiment towards Athens’ recovery efforts.
Tuesday’s agreement on fiscal and structural reforms paves the way for new discussions on debt relief which the International Monetary Fund has said is essential to make the country’s debt burden sustainable.
Reuters reported yesterday that eurozone finance ministers could agree potential debt relief measures as early as this month if Athens implements the latest reforms.