Greek Bond Spread Widens; Zeit Says Germany Considers Debt Plan
January 19, 2011, 5:58 AM EST More From Businessweek
By Keith Campbell and Lukanyo Mnyanda
Jan. 19 (Bloomberg) -- Greek bonds fell, pushing the extra yield investors demand to hold the securities over German bunds higher, after Die Zeit reported Germany is considering a plan that would help Greece restructure its debt.
Greece would be allowed to buy back government bonds with funds from the European Financial Stability Facility made available “with favorable interest conditions,” the German newspaper said in an e-mailed release today, without saying where it obtained the information.
The yield on 10-year Greek bonds jumped 32 basis points to 11.60 percent as of 10:47 a.m. in London. The spread over bunds widened 28 basis points to 8.61 percentage points.
“Whenever something happens and people don’t know what’s going to come next, the spreads widen,” said Glenn Marci, a strategist at DZ Bank AG in Frankfurt. “It’s a fear of the unknown.”
German bunds have declined this year amid investor confidence that European Union leaders will find ways to strengthen the safety net for the region’s debt-strapped countries and prevent the sovereign-debt crisis from spreading.
The Die Zeit report said that in exchange for the financing, the German government wants Greece to make new pledges on reducing its budget deficit and debt. The plan would be part of an “overall package” that the German government wants to agree on at a European Union summit on March 24-25, the report said.
Standard & Poor’s today said it assigned an AAA rating to the 27 billion-euro debt issuance program of the EFSF.