Tensions rise between Greece and its creditors

Thursday, May 14, 2015

Global risk assets rose tentatively today after yesterday’s losses as investors anticipated continued progress between Greece and its creditors. Yanis Varoufakis, the beleaguered country’s finance minister, commented on Thursday that more must be done to help the Greek economy with Mr Varoufakis particularly vocal on wanting the ECB to push it’s the repayment schedule into the future, utilising debt swaps to help manage the near €27bn bonds owed to the ECB and pushing back the €6.7bn expected to be repaid in July and August. Many critics see the request to push back repayments as kicking the can down the road, prolonging the financial crisis that has crippled the Greek economy for years. Eurozone finance ministers, led by Germany have pushed for structural reforms but progress has been slow as pension and labour issues present significant obstacles to the negotiations.

Eurozone bond yields continued to march higher with 10 year German government issued bond yields touching 0.773%. After bottoming out at record lows and  converging towards zero last month, reaching a low of 0.049% in mid-April, the benchmark yield has increased as much as 70 basis points as investors rotate out of the safe haven in favour of higher yielding assets that can provide better inflation protection. Having spiked higher, long term yields across the eurozone have pared back slightly, providing support to the euro which reached a fresh three month high against the dollar, trading towards 1.1445. After a brief correction last week which saw the single currency trade towards 1.1131 before rebounding at the start of this week, however, near term resistance around 1.1450-1.1500 could prove difficult to breach. 

German yields head higher before moderating slightly

GDBR10 Index Germany Generic Go 2015 05 14 13 22 07

EUR posts gains for a third day as rally resumes

EUR Curncy Euro Spot 2015 05 14 13 31 28

Topics: ECB, EUR, Yields
More from: Kash Kamal