By Marius Zaharia
LONDON, Feb 2 (Reuters) - Greek bond yields fell on Monday as the new Syriza-led leftist government was pitching a new debt deal to their European Union partners, sounding less confrontational than before in the view of market analysts.
Big differences between Athens and its EU partners appeared to persist, however. Relief periods in Greek markets have been very brief in recent weeks and yields remain close to some of their highest levels since the 2012 default.
After meeting new Greek Finance Minister Yanis Varoufakis, his French counterpart Michel Sapin said Athens could not expect a straight debt write-off but left the door open to other options that include giving Athens more time for repayment.
Varoufakis, who travelled on to London after the meeting, offered to produce proposals within a month for a revised debt agreement with sceptical EU partners, but he also said Greece needed to go “cold turkey” on debt.
Varoufakis was expected to meet around 100 banks and financial institutions on Monday to say Greece will be able to service its debt to private investors, according to a source with knowledge of the matter.
Greek 10-year yields tumbled 26 basis points to 11.14 percent - not an unusual shift in the illiquid debt market. They hit their highest since mid-2013 at just below 12 percent earlier in the day. Three-year yields fell 5 bps to 18.77 percent.
“The tone from the Greek officials sounds not as confrontational and harsh as (before),” said Rainer Guntermann, rate strategist at Commerzbank. “But it can quickly go the other way around. There is still elevated headline risk in that market.”
Greek Prime Minister Alexis Tsipras, in Nicosia, ruled out seeking aid from Russia and again ruled out leaving the euro.
A German finance ministry spokesperson said Wolfgang Schaeuble would meet Varoufakis in coming days, but there were no concrete plans. Angela Merkel will have a chance to meet Tsipras at an upcoming EU summit.
Germany, Europe’s dominant economy, was expected to take a hard stance in any negotiations. Some analysts believe Syriza might win support from some governments, but might struggle to convince Berlin to end austerity and renegotiate debt.
“They are looking to divide the euro area,” said KBC strategist Piet Lammens. “The Germans, of course, are very reticent.”
Elsewhere, Italian 10-year yields retreated 4 basis points to 1.57 percent, as political uncertainty in Italy eased after lawmakers elected a new president.
Italy’s parliament chose Sergio Mattarella, a constitutional court judge and veteran centre-left politician, as president on Saturday.
The vote showed Prime Minister Matteo Renzi in control of his party and allies in the ruling majority as he seeks to pass reforms to lift Italy out of six years of on-off recession.
“There is relief that Italy managed to find a new president, especially one that’s favoured by Matteo Renzi,” said Felix Herrmann, a market strategist at DZ Bank.
German Bund yields, the euro zone benchmark, matched a record low of 0.299 percent. (Reporting by Marius Zaharia; Editing by Mark Heinrich)