Bloomberg News

Greek Two-Year Notes Rise After Papandreou Wins Confidence Vote

June 22, 2011

June 22 (Bloomberg) -- Greece’s two-year notes rose after Prime Minister George Papandreou won a confidence vote, paving the way for the country to implement austerity measures needed to receive further aid.

The gains drove the securities higher for a fourth consecutive day, the longest run of price increases since June 6. A total of 155 Greek lawmakers supported the motion in the 300-seat parliament in Athens early this morning, with 143 voting against, the speaker, Filippos Petsalnikos, said. Irish securities fell and Portuguese two- and 10-year yields rose to records. German bunds advanced after the nation sold 3.4 billion euros ($4.9 billion) of 10-year bonds at an average yield of 2.96 percent.

“Greek bonds are higher as parliament duly passed the vote last night,” said Huw Worthington, a fixed-income strategist at Barclays Capital in London. “Attention will turn to next week’s vote on the austerity package. It looks like that will be passed. Then, they’ll get the money in July and we may see a bit of a relief rally.”

Greek two-year note yields, which surpassed 30 percent for the first time last week, fell 32 basis points to 27.32 percent as of 11:37 a.m. in London. The 4.6 percent security due May 2013 rose 0.425, or 4.25 euros per 1,000-euro face amount, to 69.39. The 10-year bond yield was eight basis points lower at 16.89 percent. It rose to a euro-era record 18.35 percent on June 17.

Greek Losses

Germany’s 10-year bund yield was three basis points lower at 2.95 percent. It declined to 2.91 percent on June 16, the least since Jan. 11. Yields on two-year notes were four basis points lower, at 1.49 percent. They dropped to 1.43 percent on June 16, the lowest since Feb. 22.

Investors bid for 1.6 times the amount of German 10-year bunds on offer. That compares with a so-called bid-to-cover ratio of 1.7 at the previous auction of the same securities held on May 25, which were allotted at a yield of 3.04 percent.

Greek and Portuguese securities have lost 19 percent in 2011, while Irish debt has dropped 10 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German government bonds have returned 0.2 percent, while Treasuries gained 3.2 percent, the indexes show.

The yield on Greece’s two-year note has plunged more than 200 basis points, or 2 percentage points, in four days as German Chancellor Angela Merkel dropped calls for a mandatory bond exchange that might lead credit-rating companies to declare Greece in default.

Parliamentary Approval

Papandreou reshuffled his cabinet and sought the approval of the chamber after fending off a revolt within his socialist Pasok party last week.

With the confidence vote behind him, attention now turns to whether Papandreou can push through parliamentary approval next week of a 78 billion-euro package of budget cuts to stave off the threat of default. European finance ministers said this week that they would withhold approval of a 12 billion-euro payment to the country promised for July until passage of the plans to cut the deficit, sell state assets and impose a “crisis levy” on wages.

European Commission President Jose Barroso said the vote “removes an element of uncertainty from an already very difficult situation.” He said in an e-mailed statement from Brussels it was “good news for Greece and for the European Union as a whole.”

‘Global Spillovers’

The International Monetary Fund, contributor of a third of the bailout money for Greece, Ireland and Portugal, has warned EU leaders that a failure to take decisive action on the debt crisis risks triggering “large global spillovers.”

“The market is still wary, despite the Greek confidence vote,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “The austerity measures may have a much rougher ride getting through parliament. The market is a bit concerned that the situation hasn’t greatly changed and the peripheral is still vulnerable.”

Portuguese 10-year yields rose 18 basis points to an all- time high of 11.30 percent. Two-year note yields added 35 basis points to 13.56 percent, also a record.

Irish 10-year yields jumped 28 basis points to 11.68 percent. The yield reached a record 11.70 percent on June 17.

--With assistance from Maria Petrakis in Athens. Editors: Matthew Brown, Keith Campbell

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at; Keith Jenkins in London at

To contact the editor responsible for this story: Daniel Tilles at

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