UPDATE 1-Greek bond yields hit four-month low on Macedonia accord

Greek 10-year borrowing costs dropped to a four-month low on Monday after the country's parliament approved a deal last week that changes the name of neighbouring Macedonia, ending a 28-year row and thereby paving the way for a five-year bond sale. Greece's parliament on Friday ratified an accord over the use of the term "Macedonia" that would see the tiny Balkan state renamed "Republic of North Macedonia", unblocking after decades the ex-Yugoslav republic's aspirations to join the European Union and NATO.

In addition to ending political uncertainty, sources told Reuters earlier this month the Greek debt agency planned to return to bond markets with a five-year syndicated issue once the dispute was resolved. "In general, Greece has a strong liquidity buffer, but it is always good news if an issuer like Greece is able to enter the market," said DZ Bank rates strategist Daniel Lenz.

He was referring to the country's last bailout agreement with the euro zone which means it is not under pressure to raise funds in the near future. "Everybody is still concerned about the long term credibility of Greece, but a new deal now would show that it is on the right track for future development," Lenz added.

The yield on 10-year Greek debt was down 1.5 basis points at 4.07 percent, its lowest since late September last year. Tradeweb prices, meanwhile, showed that the country's five-year bond was trading at a yield of 2.85 percent, close to a six-month low of 2.83 percent hit last week.

Macedonian bonds also benefited from the news, though most of the reaction came on Friday, with a euro-denominated issue maturing July 2021 saw its yield hit a 4-1/2 month low of 1.54 percent. Outside of Greece, euro zone government bond yields were more or less unchanged and still hovering near recent lows, as disappointing economic data continued to roll in and concerns over a global trade conflict persisted.

Earnings at China's industrial firms shrank for a second straight month in December, putting pressure on policymakers to support industries hurt by slowing prices and weak factory activity amid a protracted U.S.-Sino trade war. Germany's 10-year government bond yield was marginally lower at 0.194 percent, having been pushed lower last week when ECB President Mario Draghi warned that risks to the euro zone economy were now to the downside.

Draghi is due to speak later on Monday at the European Parliament in Brussels and investors will keep an eye out for any further details on potential changes to monetary policy, said Lenz of DZ Bank. (Reporting by Abhinav Ramnarayan; graphic by Virginia Furness; Editing by Tom Finn and Alison Williams)