Greek bonds up for first time in 5 days amid hopes of compromise

[LONDON] Greek government bonds advanced for the first time in five days on speculation Greece and its international creditors are moving toward an agreement that will help ensure the nation isn't left short of funds.

The advance pared a slump on Monday that pushed three-year yields up by the most since 2012. Greek stocks rose for the first time in four days. The nation's Finance Minister Yanis Varoufakis is due to meet with his 18 euro-area counterparts on Wednesday to propose a short-term funding program.

Mr Varoufakis told lawmakers in Athens on Monday that Greece will implement about 70 per cent of reforms already included in the current bailout agreement and pursue more overhauls with the Organization for Economic Co-operation and Development. He is also seeking a bridge agreement, which will allow Greece to revise current bailout conditions and negotiate a new program.

"We think there is room for optimism given these proposals," said Richard McGuire, head of European rates strategy at Rabobank International in London. "They indicate a willingness to compromise. We're optimistic a resolution of some form will be forthcoming and possibly by the end of this month before the current bailout expires, which could see a marked retracement of the selloff we've seen since the elections." Greece's three-year note yield dropped 172 basis points, or 1.72 percentage points, to 19.36 per cent at 12:42 p.m. London time. The rate climbed 308 basis points on Monday. The 3.375 per cent note due July 2017 rose 2.395, or 23.95 euros per 1,000- euro (US$1,129) face amount, to 71.115.

While the yield on Greek three-year notes retreated from highs set since the 2012 debt restructuring, it's still up from 10.08 per cent before Jan 25 elections swept the Syriza party to power with a plan to renege on austerity measures required by the troika of the International Monetary Fund, European Central Bank and European Commission in return for financial aid.

BLOOMBERG