subject: source One International Greek Bonds Pounded. . . . [print this page] Source One International : A sharp sell-off in Greek sovereign bonds has raised the cost of borrowing for the beleaguered nation to record high levels, reigniting concerns about its ability to rollover up to 15 billion of debt over the next two months.
The spike in Greek bond yields, which reached 7.1%, prompted the Finance Minister to caution that the current interest rate burden was unsustainable.
The clamor to offload Greek debt was sparked by rumors that the government was seeking to renegotiate a proposed rescue package revolving around loans from eurozone states and the IMF. Simultaneously, it emerged that Greece was attempting to rebrand itself to investors as an emerging market bond issuer, a notion that Source One International analysts said bordered on the ridiculous.
Although the Eurozone/IMF deal promises to provide rescue funds if Greece cannot borrow at favorable terms from the markets, Germany is insisting that any such lending from the Eurozone states should be at commercial rates.
Mr. George Papaconstantinou, the Finance Minister, denied the rumors that he was trying to renegotiate the terms of the rescue deal but his denial failed to halt the sell-off in Greek bonds and the result was a widened yield premium on Greek debt against benchmark German bunds from 3.6 to 4.08 percentage points.
Source One International analysts suggest that the involvement of the IMF raises connotations that the rates and conditions applied to any provision of funds to Greece will be punitive and, with two austerity measure packages already announced by the Greek government, it is unlikely that the population will tolerate further spending and wage cuts or tax hikes.
