Greek bonds rally on prospect of agreement with creditors

"Wolfgang Schaeuble arrived [in Brussels] with a clear willingness to reach an accord ... that includes a debt component," French minister Michele Sapin said on Tuesday, according to Market News International.

“That was not evident until now," Sapin added.

Following their meeting on 9 May and narrowing their differences euro area finance chiefs were now hoping to be able to conclude the review of the Mediterranean country’s third bailout package, MNI said.

The conclusion of the review would lead, among other things, to the reinstatement on the European Central Bank’s waiver on the requirement for Greek banks to provide collateral in order to access its liquidity injections, UBS strategist Lefteris Farmakis said in a research note sent to clients.

It would also open the door to the start of negotiations on debt relief for the stricken country.

Indeed, at their meeting, finance ministers also reached agreement on a general framework for debt relief/official sector involvement, Farmakis explained.

Critically so in the opinion of the same analyst, Eurogroup chief Jeroen Dijsselbloem hinted at the prospect for primary public sector budget surpluses for Athens once its medium-term fiscal adjustment was deemed complete.

“This is the first time there is clarity on debt relief as well as a clear signal that Eurozone member states are willing to act on Greek debt. Additionally, the allusion to lower long-term primary surpluses is arguably not only macro-economically sensible but a way to satisfy the political desideratum of keeping the IMF involved in the Greek bailout.”

However, the eligibility of Greek sovereign debt to the ECB’s programme of quantitative easing would likely be delayed until the third or fourth quarter of 2016 at the least, Farmakis said, with the minimum requirement being the conclusion of the discussions on debt relief.

As of 14:26 BST the yield on the benchmark 10-year Greek sovereign bond was down by 1.23% to 8.17%.