Italy, Spain, Portugal bond yields rise with no Greek breakthrough

LONDON: Italian, Spanish and Portuguese bond yields rose in a nervous market on Friday after a euro zone finance ministers' meeting ended the previous day with no breakthrough in deadlocked Greek debt talks.

Euro zone leaders will now hold an emergency summit on Monday to try to avert a default at the end of the month in Greece, where bank withdrawals have accelerated and government revenues slumped.

The European Central Bank's governing council will hold a telephone conference on Friday to discuss extending emergency liquidity for Greek lenders, a day after one ECB executive board member questioned whether they would be able to open next week.

Some in the market were still hopeful that a last-minute solution will be found, but there was modest selling pressure on bonds issued by euro zone countries most vulnerable to contagion from Greece.

Italian, Spanish and Portuguese 10-year yields were five to seven basis points higher at 2.35 percent, 2.34 percent and 3.16 percent, respectively. Spanish yields reversed almost all of Thursday's falls after strong demand at a bond auction in Madrid.

"The market doesn't know exactly what's going on. There are a lot of rumours ... Nobody knows exactly, which means that all options are possible at the moment," said BNP Paribas rate strategist Patrick Jacq.

Yields on German Bunds, the benchmark for euro zone borrowing costs which have over the past two weeks benefited from a renewed safe-haven bid on the Greek crisis, were 3 basis points down at 0.77 percent.

Greek 10-year yields were indicated lower at just below 13 percent.

EU diplomats denied late on Thursday a German newspaper report that Greece's creditors planned to offer to extend the country's existing aid programme until the end of this year, but without the IMF's participation.

A senior French diplomat said a deal must be struck in the next three days so that European leaders can make a decision when they meet at an extraordinary summit on Monday.

"It is not hard to argue that this game should have been put to an end months ago," said Jan von Gerich, chief fixed income analyst at Nordea.

"The fact that it has not illustrates the reluctance on both sides to throw in the towel, especially as both sides have used tactics that the other side has considered a humiliation."