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Greek Bond Yields Soar As Debt Default Fears Swell

Associated Press
Thusday April 16, 2015 7:35 AM

LONDON (AP) — Mounting fears of a Greek debt default sent the country's borrowing costs surging higher Thursday and prompted one prominent U.K. 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 ($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 rapidly 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 future 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.

Following a series of meetings in February, the Greek government, elected on a promise to bring an end to crippling austerity, was allowed to come up with a series of economic reforms. The proposals made so far have not been considered good enough by European creditors and that's the reason why the remaining 7.2 billion euros of bailout money has not been handed over to Athens.

Those talks were meant to conclude before April 24, when finance ministers from the 19 euro countries meet in the Latvian capital of Riga.

Schinas warned that "work needs to intensify before the informal eurogroup" next week.

Before then, starting Thursday, Greek Finance Minister Yanis Varoufakis will seek to convince participants at the IMF annual meeting in Washington that his government will present a fully-costed and acceptable plan in time.

Barring a brief foray into bond markets last spring, Greece has been unable to raise money on international markets for five years due to its sky-high borrowing rates.

For British bookmaker William Hill, the outlook for Greece's euro membership remains so murky that it's decided to not take any more bets on a Greek exit from the euro.

"No one is interested in backing Greece to stay in the eurozone until the end of the year, so we decided to pull the plug on the markets until either the decision to leave is taken or the crisis point passes and a plan is put in place enabling the country to remain in," said William Hill spokesman Graham Sharpe.

Raf Casert in Brussels contributed to this report.

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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