German government bonds trading higher into the New York session Tuesday as Greece’s second bailout deal failed to convince markets. Whilst the deal averts risk of an early default, with Athens now able to repay its bond redemption for E14.44bln that is due on March 20, markets are seen remaining wary on the implementation risk, with New Democracy party leader Antonis Samaras already hinting that “policy modifications might be required”. In addition, there are still questions surrounding the IMF’s involvement, and the actual PSI participation rate. At this stage, bond holders haven’t agreed to the deal and there is still a strong risk of a CDS trigger. Focus now turning to the actual implementation of the package. Bunds also bounced with squeeze higher in Gilts after UK PSNB data posted the highest surplus since January 2008, and along with revisions to previous data, suggest borrowing is on track to undershoot the most recent forecasts from the OBR. Also underpinning Gilts is strong demand at syndicated re-open 2062 IL gilt, where pricing from the DMO is expected soon.
EasyForexNews Research Team