Eurozone bond yields rise as election worries fade

The market’s initial dismay over Syriza’s electoral victory faded early Monday as the euro recovered, European stocks traded higher and 10-year eurozone bonds sold off, indications that the market had already priced in the party’s success at the polls.

Weakness in short-term U.S. Treasurys, a trend that emerged last week, continued Monday, as investors bought long-term debt, driving yields lower. Bond yields move inversely to prices, rising as they fall.

The yield on the 10-year German bund TMBMKDE-10Y, +6.44% moved 2.2 basis points higher to 0.342%, according to Tradeweb data. The yield on the 10-year French bond TMBMKFR-10Y, +5.02% was up 2.4 basis points at 0.571%.

The 10-year yield TMUBMUSD10Y, +1.62% was down 0.8 basis point to 1.810%, while the two-year yield TMUBMUSD02Y, +5.77% was up two basis points to 0.519%.

The 30-year yield TMUBMUSD30Y, +0.79% was down 1.6 basis points to 2.377%.

David Keeble, head of fixed-income strategy at Crédit Agricole, said that the initial shock of the Greek election result quickly wore off because the market had already priced in the likelihood that Syriza would need to form a governing coalition after winning a plurality of the vote. “It wasn’t a big surprise that we didn’t get [former Greek Prime Minister Antonis] Samaris back,” Keeble said. “It could’ve been worse, relative to expectations anyway.”

The far-left, antiausterity Syriza party won a plurality of 149 seats in the 300-seat Greek Parliament in Sunday’s election. It quickly formed a coalition government with the far-right, anti-euro Independent Greeks party.

Elsewhere, the Ifo Institute said Monday that Germany’s business climate was unexpectedly strong in January. The strong data added some momentum to the selloff in German bunds, Keeble said.