Greek bonds and stocks rebounded on Tuesday ahead of an emergency meeting of eurozone finance ministers that some hope could be the first step to finding an agreement to ease the standoff between Greece and its lenders.

Finance Minister Yanis Varoufakis makes his debut meeting with eurozone peers on Wednesday when he will outline Athens's demands for a new debt deal that would allow it to shake off much of the austerity imposed by a European Union/International Monetary Fund bailout since 2010.

Athens also wants a "bridge agreement" until June to buy time until a properly negotiated settlement, a demand that was rejected by the head of the Eurogroup finance ministers Jeroen Dijsselbloem.

"We know it's going to be a tough period of negotiations but at least they've got some sort of starting point," said Orlando Green, a strategist at Credit Agricole.

"It's a game of chicken at the end of the day but it will eventually result in one side bending more than the other but they both claim victory."

Yields on three-year Greek bonds fell by 178 basis points to 20.07 percent with five-year yields down 95 bps at 15.63 percent. They remained far above 10-year equivalents which were 51 bps lower at 10.80 percent reflecting investor concern that they may not get all their money back.

Greek shares advanced, with the country's benchmark ATG equity index rising 3.2 percent. Shares in its major banks also rose, with the Athens Stock Exchange FTSE Banks Index .rising 7.7 percent.

Other European countries are also increasingly concerned about potential fallout on their economies of a Greek exit from the eurozone. British finance minister George Osborne said the danger of a "miscalculation leading to a "very bad outcome" between Greece and the euro area is increasing, Bloomberg reported.

Some analysts say both sides needed to strike some kind of compromise to avoid the sharp selloff in Greek stocks and bonds from spilling over to other markets.

"It would seem the market is taking a glass half full view of Greece’s reported proposal - perhaps simply owing to the fact there is a proposal at all," Rabobank strategists said in a note.

[Reuters]