The yield on Greece's bonds have tumbled the most since June after creditors agreed on Monday to resume talks in Athens over steps needed to continue a bailout of the nation, driving expectations that Greece will be able to meet its deadline for debt redemption by July.

As The FT reports, bailout monitors are now due to return to Greece following a meeting of finance ministers and IMF officials in Brussels yesterday, where creditors claimed a partial breakthrough in talks.

In return, the Greek government has agreed to examine ways in which it can raise its income tax threshold and reduce pension spending – measures the IMF has pushed for if the country is to meet its budget targets over the next decade or so. Investors seem to be taking cheer in the developments...

Tuesday’s rally notwithstanding, some analysts sounded a note of caution...

“Yesterday’s positive Eurogroup meeting broke the stalemate and increased the odds that the second review will conclude earlier than what the market had priced in,” said Thanassis Drogosis, the Athens-based head of institutional equities at Pantelakis Securities SA. “Still, there are some crucial questions such as time lines, the role of the International Monetary Fund, remain unanswered.”

“We would caution against too much optimism, as we agree with the IMF’s debt-sustainability analysis, which concluded that Greece’s debt is unsustainable,” said Peter Chatwell, the London-based head of rates strategy at Mizuho. “We expect it will be very difficult politically to arrive at solution which keeps all parties happy.”

So bonds are rallying as the 3rd or 4th (we lose count) bailout looms - only agreed if Greeks sacrifice more of their pensions and living standards? (or their gold?)

However, in hints of a change in tone from the EU, Eurogroup president Jeroen Dijsselbloem stressed that Greece’s reform efforts would shift “away from austerity and putting more emphasis on deep reforms”.