Wednesday, April 28, 2010

The debt market gives up on Greece

The debt markets are closing for Greece as it sinks in that its debt trajectory is unsustainable, whether or not it receives the EU/IMF rescue package. The FT reports today: 

Greek two-year bond yields jumped more than 3 percentage points to more than 18 per cent Wednesday morning amid growing nervousness about the state of the country’s deteriorating public finances. 

Greek two-year bond yields are now the highest in the world, more than even the weakest emerging market economies such as Argentina and Venezuela. 

The extra premium Greece must now pay over Germany, Europe’s benchmark economy, for two-year debt is more than 17 per cent, an unsustainable level. 

Gary Jenkins, head of fixed-income research at Evolution, said: “Greece cannot afford to pay yields this high as the interest rate charges would be so great, the country’s public debt would continue to rise until the economy collapsed.” 

Greek 10-year yields also rose more than a percentage point to 11.034 per cent.

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