UPDATE 3-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 that changes the name of neighbouring Macedonia, ending a 28-year row and paving the way for a five-year bond sale. Greece's parliament on Friday ratified an accord that will see the tiny Balkan state renamed "Republic of North Macedonia", unblocking the ex-Yugoslav republic's aspirations to join the European Union and NATO.

The decision removed a cloud of political uncertainty and paved the way for the Greek debt agency to return to bond markets with a five-year syndicated issue, announced mid-morning. "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 4.05 percent, its lowest since late September last year, and is down 35 bps from the start of the year. The country's five-year bond yield, meanwhile, was unchanged at 3.04 percent, but not too far from a six-month low of 2.98 percent hit last week.

Macedonian bond prices also rallied on Monday, with yields on a Jan 2025 issue hitting a one-year low of 2.51 percent. Elsewhere, core euro zone government bond yields were 1-2 basis points higher.

There was a slight underperformance in Belgian bonds after Belgium said it plans to issue a new 30-year bond sold via a syndicate of banks. Austria, meanwhile, announced that it would sell a new 10-year bond via syndication.

Germany's 10-year government bond yield was marginally higher at 0.21 percent, pulling back from session highs after ECB President Mario Draghi said the ECB could resume bond purchases if necessary but such a move is unlikely this year. Italian bond yields, which had risen as much as 5 bps earlier ahead of upcoming supply this week, also pulled back in late trade.

Italy's 10-year government bond yield was up 2.8 bps at 2.67 percent. (Reporting by Abhinav Ramnarayan; graphic by Virginia Furness; Additional reporting by Dhara Ranasinghe; Editing by Andrew Heavens)