Greek bond yields soar as debt default fears swell
Mounting fears of a Greek debt default sent the country’s borrowing costs surging higher Thursday and prompted one prominent UK bookmaker to stop taking bets on the possibility of Greece leaving the euro.
The latest jitters were stoked by a report in the Financial Times that the radical left- led Greek government, elected in January, recently made an “informal approach” to the International Monetary Fund to have bailout repayments delayed.
Citing unnamed officials from both sides, the newspaper said Athens was rebuffed and persuaded not to make a request to have two separate repayments to the Washington D.C.-based institution in May delayed. Greece owes the IMF around 1 billion euros (US$1.06 billion) in repayments next month.
For investors, the report was unsettling as it signaled that the Greek government is still a long way from convincing its European creditors about an economic reform plan that is needed to unlock the remaining funds in the country’s bailout. Since 2010, Greece has relied on a 240 billion euro bailout from its euro partners and the IMF.
“What is concerning is how quickly these ‘ informal’ talks could turn into serious delays and missed payments as Greece rap- idly runs out of money,” said Connor Campbell, financial analyst at London-based spread betting firm Spreadex.
Failure to agree a plan with creditors will mean that the country will default, a development that could force the government to put limits on money transfers and even lead the country to leave the euro.
Investors are wary and the yield — a gauge of investor risk — on Greece’s 10-year bonds surged a whole percentage point Thursday to just below 13 percent.
The 3-year yield jumped to a staggering 28 percent or so — though that’s still way down on the 120 percent it hit in 2012, when traders thought Greece’s euro fu- ture was hanging by a thread.
Many in the markets think the Greek government will struggle to make its upcoming debt repayments alongside day-to-cost commitments on such things as salaries and pensions if it doesn’t agree an economic reform package with European creditors. A missed payment is an effective default.
In some abrupt language, EU spokesman Margaritis Schinas said Thursday that “we are not satisfied with the level of progress made so far.”
Experts from Greece and its international creditors have been holding a series of talks in Brussels and Athens over the reform plans.