Greece sovereign debt fears reignited
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Fears for the future of the Greek economy resurfaced yesterday after a sudden sell-off of Greek sovereign debt led to another rise in debt yields.
Yields on Greek bonds reached 7.1 per cent after reports of the International Monetary Fund sending a delegation to Greece to reassess and speed up fiscal reforms.
The news also affected the Euro, which yesterday dropped against the pound to below 1.13.
Charles Stanley says yields on six-month debt jumped by 150bps, having been up 250bps at one point. Analyst Jeremy Batstone-Carr says Greece has to raise new funds to roll these bonds soon, meaning its problems are far from resolved.
He says: “So the show goes on. The country returns to the market in May and June to fund roll over of maturing debt at interest rates of 6.5 per cent to 7 per cent, levels which, if sustained, will surely bankrupt the country.
“The sad fact is that there is, at present, no way that Greece can escape this vortex into calamity. The country lived beyond its means, borrowing incessantly from overseas investors for too long.
“Investors can expect to see a series of disorderly debt renegotiations over the late spring but pay close attention to bond yields in other highly indebted European countries. If Greece falls so can Portugal, Spain and even Italy in a worst-case scenario - the sovereign debt crisis is still with us.”
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