Analysts at Brown Brothers Harriman noted the other the positive market reception to Greece's proposals.
Key Quotes:
"The essence of the new government's proposals is for a bond swap. It wants to exchange its bonds in the official sector with growth-linked bonds and perpetual bonds for the ECB. It also wants the ECB to continue funding Greek banks through a transition period lasting through May."
"In exchange, it is committed to running a primary budget surplus, even if it means it cannot fulfil its public spending promises. It also promises structural reforms and more robust tax collection."
"The Greek 10-year bond yield has fallen nearly 100 bp, and the 3-year bond yield has plunged over 200 bp. Greek stocks have rallied 7-8%. It has had a positive impact on peripheral debt, where Spain, Italy, and Portuguese 10-year yields are off 5-7 bp. Core bond yields are 2-4 bp higher, which means spread compression. News that Italian deflation deepened in January (-0.4% year-over-year from -0.1% in December) and that Spanish unemployment did not rise as much as expected (78k instead of the consensus of 88k) helped support the peripheral bonds as well."
"There should be no doubt that European officials will respond with counter-offers. But, the fact of the matter is that for the first time since the election, there is greater confidence in our assessment that the basis of a compromise exists and that talk about a Grexit is premature."
Key Quotes:
"The essence of the new government's proposals is for a bond swap. It wants to exchange its bonds in the official sector with growth-linked bonds and perpetual bonds for the ECB. It also wants the ECB to continue funding Greek banks through a transition period lasting through May."
"In exchange, it is committed to running a primary budget surplus, even if it means it cannot fulfil its public spending promises. It also promises structural reforms and more robust tax collection."
"The Greek 10-year bond yield has fallen nearly 100 bp, and the 3-year bond yield has plunged over 200 bp. Greek stocks have rallied 7-8%. It has had a positive impact on peripheral debt, where Spain, Italy, and Portuguese 10-year yields are off 5-7 bp. Core bond yields are 2-4 bp higher, which means spread compression. News that Italian deflation deepened in January (-0.4% year-over-year from -0.1% in December) and that Spanish unemployment did not rise as much as expected (78k instead of the consensus of 88k) helped support the peripheral bonds as well."
"There should be no doubt that European officials will respond with counter-offers. But, the fact of the matter is that for the first time since the election, there is greater confidence in our assessment that the basis of a compromise exists and that talk about a Grexit is premature."
