Greek bond yields pushed lower on Friday on hopes euro zone finance ministers will eventually reach agreement on a loan extension that will help Greece avoid bankruptcy. Greek Prime Minister Alexis Tsipras said on Friday he was certain euro zone finance ministers would accept Athens' request for an extended loan, even though Germany demanded "significant improvements" in Greek reform commitments to meet the conditions of its 240 billion-euro international bailout.
The chairman of euro zone finance ministers, Jeroen Dijsselbloem, said there was reason for some optimism on finding a solution after an initial round of talks. German European Commission member Guenther Oettinger said earlier that a meeting of euro zone leaders next week may be needed to reach a deal. Investors, however, shrugged off a report in German magazine Spiegel that the European Central Bank was preparing for Greece's exit from the euro zone. The ECB declined to comment on the report.
"The expectation that there will be an agreement eventually is providing relief to Greece, and it also makes sense to have peripheral markets outperforming as well," said Cyril Regnat, a strategist at Natixis. Greek three-year yields dropped 42 basis points to 16.71 percent, pulling further away from highs above 22 percent struck last week. Ten-year equivalents were 8 bps lower at 10.16 percent.
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