Greek bonds rally after parliament approves new austerity measures

The Greek government bond rallied on Monday after policymakers in Athens adopted a new austerity measures. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 15bps to 8.424 pct and the yield on the 2-year bonds dipped 50bps to 9.335 pct by 0935 GMT.

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.

Today the Euro group are meeting to talk about a comprehensive package of policy reforms and also the sustainability of Greece's public debt. Both components should be set up keeping in mind the end goal to settle the system's first review and open further financial assistance to Greece. The markets will now focus on the April CPI data (0900 GMT), March industrial production (0900 GMT) due on Tuesday, February unemployment rate on Thursday (0900 GMT), Q1 GDP on Friday (0900 GMT).