Mar­kets rat­tled by down­grade; euro falls

Kathimerini English - - Business & Finance -

Greece led a surge in the cost of in­sur­ing Euro­pean gov­ern­ment bonds yes­ter­day as Stan­dard & Poor’s cut its credit rat­ing on concern the coun­try is head­ing for a “se­lec­tive de­fault” by ex­tend­ing debt ma­tu­ri­ties.

Credit de­fault swaps on Greece jumped 30 ba­sis points to a record 1,371 ba­sis points, ac­cord­ing to CMA. Swaps on Ire­land reached an all-time high of 681 ba­sis points and con­tracts on Por­tu­gal also rose.

“One by one, they will all need to rene­go­ti­ate,” Bill Blain, co-head of strat­egy at bro­ker Newedge in Lon­don, told Bloomberg.

“As Europe’s most pe­riph­eral econ­omy, Greece is just a ca­nary in the coal mine.”

Swaps on Ire­land climbed 22 ba­sis points, ac­cord­ing to CMA. Con­tracts on Por­tu­gal rose 16.5 ba­sis points to 659, ap­proach­ing the record 681 set April 26.

Greek bonds also dropped yes­ter­day, lead­ing de­clines by the se- cu­ri­ties of Europe’s most in­debted na­tions.

The losses pushed the ex­tra yield, or spread, that in­vestors de­mand to hold the debt in­stead of sim­i­lar-ma­tu­rity Ger­man bunds to the most in al­most two weeks.

Ger­man bunds rose on de­mand for the safest as­sets and data showed Euro­pean in­vestor con­fi­dence fell more than econ­o­mists pre­dicted this month.

The yield on the Greek se­cu­rity climbed 13 ba­sis points to 15.63 per­cent. The spread over Ger­man bunds widened 20 ba­sis points to 1,253 ba­sis points, the most since April 27. The two-year note yield fell 10 ba­sis points to 25.24 per­cent.

The euro turned down against the dol­lar in US trad­ing yes­ter­day, touch­ing its low­est level in two weeks, af­ter S&P’s de­ci­sion, re­viv­ing wor­ries that pe­riph­eral debt prob­lems will force Euro­pean of­fi­cials to change the terms of its bailouts.

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