Bonds buoyed by Greek return

File picture: Alex Grimm

File picture: Alex Grimm

Published Apr 10, 2014

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London - Greece's stunning return to the bond market buoyed European fixed income assets on Thursday, enabling euro zone bond prices to strengthen and outperform flat equity markets.

Global equities had earlier risen after minutes from the Federal Reserve's last meeting tempered concerns over future US interest rate rises, although those gains later fizzled out.

The MSCI All-Country World index rose 0.2 percent while the similar MSCI World Index, which only tracks stocks from developed economies, inched up by 0.1 percent.

In Europe, the MSCI Europe index edged down by 0.2 percent while the FTSEurofirst 300 index of top European shares slipped 0.5 percent.

Nevertheless, investors looked optimistically to Greece's much-heralded return to the bond markets on Thursday for further evidence that Europe's economic recovery is gathering pace.

Just two years after being at the epicentre of the euro zone's sovereign debt crisis, Greece launched a 3 billion euro ($4.2 billion) five-year bond offering a yield of 4.95 percent.

The country's deputy prime minister Evangelos Venizelos said the sale had been at least eight times oversubscribed.

Commerzbank strategist Michael Leister said the sale showed the country was on track in terms of fighting back from a deep economic slump.

“It's not a particularly cheap deal for them but they are on the right track and it shows the debt crisis has eased significantly,” he said.

 

FED MINUTES PROP UP STOCKS

The Fed minutes released on Wednesday fuelled a rally on Wall Street, where all three major US stock indexes ended up more than 1 percent.

Financial markets also pushed out expectations of a first Fed rate hike by about six weeks, to July 2015, trading in interest-rate futures showed, while the MSCI Emerging Market index rose 0.6 percent.

The Fed's minutes also weighed on the US dollar, which traded flat against a basket of six major currencies.

“The Fed minutes suggested that the Fed committee was not as hawkish as some had been led to perceive,” said Hantec Markets analyst Richard Perry.

Weak Chinese trade data earlier in Asia caused Brent crude futures to ease towards $107 a barrel on Thursday, while gold scaled fresh two-week highs.

However, Hampstead Capital hedge fund manager Lex van Dam said equities remained his preferred asset class.

He said world stock markets remained buoyed by the efforts of the Fed and other major central banks to support economic growth and keep interest rates low.

“This does continue to make me believe that equities are the best play in town.” - Reuters

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