Markets Respond to Greek Political UncertaintyAuthor: David GoldsteinLast Updated: December 10, 2014 With Greece experiencing political uncertainty, both stock and bond markets for the country were upset in today’s trading, following the primary equity index in Athens having its biggest, single-day loss since 1987.Athex, nearly 13% lower in after-hours, dropped an additional 4% in early morning trading. Even though it ultimately traded only 1% lower during the same day of trading, of all European indexes it remained the worst-performing.In looking at 10-year-government bonds for Greece, yield climbed 0.82 of a percentage point to 8.72%. This indicates a drop in prices for bonds while investors scurry toward assets considered safer during periods of volatility. Hitting a new all-time low of 0.678% were yields on 10-year German government bonds.While 10-year bond yield for Greece are still well below the peak of more than 30% during the Euro crisis of 2012, it continues to represent a relatively fresh burst of nerves and still a significant difference from three years ago when yields were at the 5.5% level.The three-year euro bond for the country that had a yield price in July of 3.5% topped out at 9.3% in current trading.The cost to insure debt against default for Greece also rose to about 0.95 of a percentage point to 918 basis points. With this, investors might have to pay an annual cost of $918,000 in order to protect a notional debt of $10 million for a period of five years.Mark Hammer, strategist at ING stated that everyone is watching Aegean. The Greek government made an announcement earlier this week that a new president would be voted on by the parliament on December 17, which is two months ahead of the schedule. The new president would take over for Karolos Papoulias, with his five-year term ending sometime in March.That announcement raised concerns that Syriza, the radical left opposition party in Greece, might win the national elections if voting rounds for the new president do not offer a viable solution that everyone accepts.Syriza, a party that has threatened to make major changes pertaining to the economic overhaul but also the austerity program accompanied by the international bailout, would win the national elections by a three to six percentage point margin, this according to the latest opinion polls. It is also speculated that Syriza might cause a new crisis with creditors in Greece.The bailout for Greece will be extended by two months after being agreed upon by Eurozone finance ministers. With this, Athens along with international creditors would be provided additional time to determine appropriate budget cuts. This time would also push a decision regarding support that goes beyond the elections for a new president.As explained by Ian Williams, strategist and economist with the Peel Hunt brokerage firm, Grexit fell of the things that investors in Europe were concerned with but as of yesterday, it came back with a vengeance, this as a reference to Greece possibly leaving the Eurozone.Paul Donovan, economist at UBS, stated that the selloff stretches further than Greece. Next year, there will be elections in Portugal and Spain and then there is the risk of elections in Italy as well, which reminds of the risk with euro politics.In the meantime, shares for Europe experienced a slight recovery after two prior sessions of sharp selloffs. For instance, Stoxx Europe 600 hit 0.5% higher after closing out the prior day’s trading down over 2%. With this, traders confirmed that there were some investors who saw this as an appealing entry point.