Prices of lower-rated eurozone bonds fell on Friday, deepening sharp falls on Thursday caused, Reuters said, by nervousness about the stability of the Greek government, a tax on foreign holders of Greek bonds and weak growth.
“The rally in peripheral government bonds had been steady since the beginning of 2014, but economists claimed that the reversal might be more than a blip,” wrote Reuters. Daniel Lenz, strategist at DZ Bank said “There will be some investors that are concerned, and should take into consideration that is not just a one-day movement but something more prolonged.”
The yield on Greek 10-year government bonds jumped by four basis points, reaching 6.87%, after a drop on Thursday attributed to a Greek government circular detailing capital gains tax that would apply to foreign holders of Greek bonds.
A press release from the Greek Ministry of Finance announced that there are no capital gains taxes for foreign investors transferring Greek bonds as of January 1, 2014. “Consequently, the reports referring to retroactive taxation or intention for retroactive taxation are completely untrue.”
It was also pointed out that the circular aimed at specifying that former tax legislation including a 33% tax on foreign legal entities and 20% for individual investors had been eliminated in 2014.
Italian, Portuguese, Irish and Spanish bond yields also jumped on the news, even though there was no news.
“The price action was very telling … it just showed how fast such a stampede can be generated to avoid any such confiscatory actions,” said KCG strategist Ioan Smith.
“Expected gains for Greek eurosceptic parties in next week’s election might erode domestic support for the ruling coalition and potentially trigger a general election,” noted Reuters.
See all the latest news from Greece and the world at Greekreporter.com. Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!
