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.

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