German government bonds are opening lower Friday amid optimism that the second Greek bailout package will be approved on Monday. Risk-on sentiment returned late Thursday session on press speculation that the finishing touches are being made to Greece’s second bailout package and approval from eurozone finance ministers is likely at meeting on Monday. Talk that a debt/GDP target of 125%in 2020 is now acceptable and unsubstantiated talk of a “escrow account” that would be able to bridge loans to Athens for 9 to 12 months also did the rounds. In addition, story that the Eurosystem is currently exchanging at least some of its Greek bonds against new bonds also fuelled speculation that the bond swap deal will be completed by Monday. However, this is still only all speculation, with markets wary about false hopes on the Greek deal, which never materialise given the constant disagreements between Greek and German officials along with the continued PSI saga. Interestingly, the FT notes that the ECB/Greek debt swap deal could trigger legal action from other bondholders.
EasyForexNews Research Team