Markets Should Widen their View Outside Greece

Gripped by the prospect of default in Greece? You may be looking in the wrong direction.  The southern European nation may have the world’s highest debt burden, equal to 175 per cent of its economy or gross domestic product, but according to credit rating agencies that does not make Greece the riskiest borrower for bond investors.

That title is held by Ukraine, presently engaged in fighting a war with pro-Russian separatists as well as battling creditors over $15bn of debt the country says it cannot afford to service.

The difference between Greece and Ukraine is reflected in the prices at which the sovereign debt of the two countries trades. Prices for Greek bonds have crashed over the past year as investors took fright at the political success of the anti-austerity Syriza party, yet they remain above 50 cents in the euro — considered a benchmark default level. Ukraine’s equivalent bonds trade below 50 cents in the dollar, suggesting a far higher risk of a default.