A powerful rally in Greek government bonds, which has seen prices surge four-fold since June, is running out of steam with investors still nervous the bailed-out country could be at risk of leaving the euro zone.
Expectations – confirmed last week – that Greece would secure further bailout funds and bets further losses will not be imposed on private Greek bond holders have cut the return investors demand to hold 10-year Greek bonds by two thirds from record levels of 30 percent before elections last June.
Fears Greece could leave the euro peaked before the election when, with voters enraged at mainstream parties that had imposed harsh spending cuts, investors thought anti-bailout politicians might come to power.
Those worries have since eased but, for the rally to go much further, investors would effectively be pricing out any exit risk, analysts said. This is seen as premature.
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