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Greek Bonds Lead European Slide, CDS Rise to Record, on EU Bailout Review
By Lukanyo Mnyanda and Anchalee Worrachate - May 9, 2011 1:24 PM GMT+0200 Mon May 09 11:24:06 GMT 2011
The losses pushed the Greek two-year yield up for a third day and the cost of insuring the nation’s debt climbed to a record. Euro-region officials said that Greece needs “a further adjustment program” after an unscheduled meeting over the weekend with Luxembourg Prime Minister Jean-Claude Juncker, chair of the group of finance ministers. German 10-year bunds rose as declining equities boosted demand for the safest assets and data showed European investor confidence fell more than economists predicted this month.
“I don’t expect any strong rebound in peripheral bonds until policy makers spell out exactly what they plan to do,” said Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London. “Demand for core bonds such as German bunds at the expense of peripheral debt will remain a key theme in the market, at least in the near term.”
The two-year Greek yield increased nine basis points to 25.42 percent at 12:10 p.m. in London, pushing gains in the past three trading days to 68 basis points. The 10-year yield rose 11 basis points to 15.62 percent. Portugal’s two-year note yield jumped 20 basis points to 11.87 percent, while similar-maturity Irish notes yielded 12.03 percent, up 42 basis points.
CDS Record
Credit-default swaps on Greek debt rose 19 basis points to a record 1,360, according to CMA, signaling a 68 percent probability of default with five years.
Greek bonds have lost investors 11.5 percent this year as speculation intensified that the country would become the first euro-area nation to restructure its debt, indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies showed. Bonds of Portugal, the third country to seek aid after Greece and Ireland, have lost 14.9 percent. Irish securities returned a negative 6.5 percent while German government bonds handed investors a loss of 1.2 percent.
Investors are increasing bets on a Greek default as the country struggles with a contracting economy, higher borrowing costs and falling tax revenue, offsetting spending cuts required in return for last year’s 110 billion-euro rescue. Officials in Athens denied speculation over the weekend that Greece was headed out of the euro or into default. Spiegel magazine reported that Greece was considering a return to the drachma.
‘A Lot of Trouble’
“Greece for sure can cause a lot of trouble to the rest of Europe,” analysts led by Vincent Chaigneau, head of rate strategy at Societe Generale SA in London, wrote in an e-mailed note to clients today.
German 10-year bonds rose for a third day, pushing the yield on the securities back below that on similar-maturity U.S. Treasuries. They yielded three basis points less than their American counterpart, after exceeding them last week for the first time since 2009.
An index measuring sentiment in the 17-nation euro region fell to 10.9 this month from 14.2, Limburg, Germany-based Sentix said today. The median prediction of eight economists surveyed by Bloomberg was for a decline to 13.8.
The German 10-year yield fell three basis points to 3.14 percent, adding to last week’s seven-basis-point decline.
The securities climbed last week as the European Central Bank left the refinancing rate at 1.25 percent, with its President Jean-Claude Trichet saying the central bank will monitor inflation risks “very closely.”
A Greek debt restructuring would wreak more damage than providing the country with more help, the senior finance spokesman for German Chancellor Angela Merkel’s party said.
Germany may consider more help for Greece under stringent conditions to avoid a restructuring, which would risk an “even bigger problem than we have already,” Michael Meister, the parliamentary finance spokesman for Merkel’s Christian Democratic Union, said in an interview in Berlin today.
By Lukanyo Mnyanda and Anchalee Worrachate - May 9, 2011 1:24 PM GMT+0200 Mon May 09 11:24:06 GMT 2011
The losses pushed the Greek two-year yield up for a third day and the cost of insuring the nation’s debt climbed to a record. Euro-region officials said that Greece needs “a further adjustment program” after an unscheduled meeting over the weekend with Luxembourg Prime Minister Jean-Claude Juncker, chair of the group of finance ministers. German 10-year bunds rose as declining equities boosted demand for the safest assets and data showed European investor confidence fell more than economists predicted this month.
“I don’t expect any strong rebound in peripheral bonds until policy makers spell out exactly what they plan to do,” said Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London. “Demand for core bonds such as German bunds at the expense of peripheral debt will remain a key theme in the market, at least in the near term.”
The two-year Greek yield increased nine basis points to 25.42 percent at 12:10 p.m. in London, pushing gains in the past three trading days to 68 basis points. The 10-year yield rose 11 basis points to 15.62 percent. Portugal’s two-year note yield jumped 20 basis points to 11.87 percent, while similar-maturity Irish notes yielded 12.03 percent, up 42 basis points.
CDS Record
Credit-default swaps on Greek debt rose 19 basis points to a record 1,360, according to CMA, signaling a 68 percent probability of default with five years.
Greek bonds have lost investors 11.5 percent this year as speculation intensified that the country would become the first euro-area nation to restructure its debt, indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies showed. Bonds of Portugal, the third country to seek aid after Greece and Ireland, have lost 14.9 percent. Irish securities returned a negative 6.5 percent while German government bonds handed investors a loss of 1.2 percent.
Investors are increasing bets on a Greek default as the country struggles with a contracting economy, higher borrowing costs and falling tax revenue, offsetting spending cuts required in return for last year’s 110 billion-euro rescue. Officials in Athens denied speculation over the weekend that Greece was headed out of the euro or into default. Spiegel magazine reported that Greece was considering a return to the drachma.
‘A Lot of Trouble’
“Greece for sure can cause a lot of trouble to the rest of Europe,” analysts led by Vincent Chaigneau, head of rate strategy at Societe Generale SA in London, wrote in an e-mailed note to clients today.
German 10-year bonds rose for a third day, pushing the yield on the securities back below that on similar-maturity U.S. Treasuries. They yielded three basis points less than their American counterpart, after exceeding them last week for the first time since 2009.
An index measuring sentiment in the 17-nation euro region fell to 10.9 this month from 14.2, Limburg, Germany-based Sentix said today. The median prediction of eight economists surveyed by Bloomberg was for a decline to 13.8.
The German 10-year yield fell three basis points to 3.14 percent, adding to last week’s seven-basis-point decline.
The securities climbed last week as the European Central Bank left the refinancing rate at 1.25 percent, with its President Jean-Claude Trichet saying the central bank will monitor inflation risks “very closely.”
A Greek debt restructuring would wreak more damage than providing the country with more help, the senior finance spokesman for German Chancellor Angela Merkel’s party said.
Germany may consider more help for Greece under stringent conditions to avoid a restructuring, which would risk an “even bigger problem than we have already,” Michael Meister, the parliamentary finance spokesman for Merkel’s Christian Democratic Union, said in an interview in Berlin today.
