Greek bonds declined as a government official said prime minister Alexis Tsipras was set to propose snap elections. Italian bonds also fell. Mr Tsipras, who was elected in January on an anti-austerity platform, approved sweeping economic reforms attached to an international bailout at the cost of seeing his own party split. He'll ask for elections to be held September 20th, according to a Greek government official.
"Greek news plus weak sentiment on a Thursday afternoon sees a sell-off into the close," said Owen Callan, a Dublin- based fixed-income strategist at Cantor Fitzgerald. While the election "had been somewhat expected," there was a "small possibility that Tsipras would manage to get through a vote of confidence but, alas, not to be," he said.
Greece’s two-year note yield rose 132 basis points, or 1.32 percentage point, to 12.79 per cent as of the . London close. The 3.375 per cent security due in July 2017 fell 1.845, or €18.45 euros per €1,000 face amount, to 84.965.
Greek ten-year bond yields added 21 basis points to 9.56 per cent, while those on similar-maturity Italian bonds rose two basis points to 1.82 per cent.
Irish ten-year yields dropped slightly to 1.252 per cent.
Spain’s ten-year bond yield was little changed at 1.99 per cent, after earlier falling as much as six basis points to 1.93 per cent. Spanish bonds climbed earlier after the nation auctioned €3.5 billion of debt Thursday, which saw demand rise and included the current ten-year securities. The nation also sold notes due in 2018 and 2024. Yields on Greek bonds are still below levels reached in previous periods of upheaval.
"The earlier widening of peripheral spreads is gathering some additional steam" after the news from Greece, strategists at Rabobank International, led by London-based head of European rates strategy Richard McGuire, wrote in an e-mailed note. The moves were "warranted" on concern Greece's reform programme "will be put on the back-burner as the electoral campaign kicks off," they wrote.