Greek Bond Yields Rise as Grexit Fears Grow

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.

via Kitco

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza