Greek bonds gain to record since 2015 after EU debt reliefs

The Greek government bonds rallied on Tuesday after Euro zone finance ministers offered debt relief to the cash-strapped country from 2018. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 51bps to 7.829 pct and the yield on the 2-year bonds dipped 161bps to 7.789 pct by 0840 GMT.

The Euro zone finance ministers offered on Monday to grant Greece debt relief by giving it longer grace periods and bond maturities from 2018 if the country delivers by then on all reforms agreed under its latest bailout. The offer, to be worked out in detail by deputy finance ministers by May 24, appears to be a compromise between Germany, which does not believe Greece needs additional debt relief, and the International Monetary Fund, which insists it is necessary.

"This agreement on debt... by the European partners is expected to allow the IMF to participate in the programme," the ministers said in a statement.

On Sunday, Greek parliament members voted in favour of new austerity measures, which include tax hikes, pension cuts, and new taxes on internet and TV. In addition, residents will be liable to a scope of new taxes, such those on coffee and electronic cigarettes and the VAT on fuel will increase by around 24 pct. According to recent Reuters report, a positive sign-off on the reform review will unlock more than 5 billion Euros to ease Greece's squeezed finances and meet debt repayments maturing in June and July. Greece also hopes that the signoff will launch discussions on debt relief.

"The vote in parliament is constructive and positive for the Euro group talks and that should help the decision to give Greece additional support, although the Greek bond market is illiquid, the fact that yields are lower is a good sign," said Patrick Jacq, European rate strategist at BNP Paribas to Reuters.

The markets will now focus on the February unemployment rate on Thursday (0900 GMT), Q1 GDP on Friday (0900 GMT).