Greek debt hit by restructuring fears

Greek debt hit by restructuring fears



FT.com / Capital Markets - Greek debt hit by restructuring fears

• Greek debt hit by restructuring fears



• Greek borrowing costs reached a euro-era high compared with those of Germany.



• George Papaconstantinou told the Financial Times that Greece needed more time to convince international investors of its commitment to reform its finances.



• Greece’s debt levels were unsustainable, “further measures” would have to be taken.



• any involuntary restructuring before 2013, but warned that investors could face losses after that point.



• “Greek bonds are getting crushed,” said Gary Jenkins, head of fixed income at Evolution Securities.



• These comments didn’t say anything new, but they gave short sellers an excuse to get back into the market at better prices after the recent rally.”



• Yields on Greek two-year bonds jumped 0.9 of a percentage point to 17.829 per cent.



• a Greek restructuring “will inevitably cause collateral damage to Europe’s banking system and contagion across Europe’s most vulnerable sovereign borrowers.”



• Investors fled risky “peripheral” eurozone debt for the haven of Germany, where 10-year bond yields, which move inversely to prices, dropped nearly 4 basis points at one point before ending flat at 3.428 per cent.



• “Everyone thinks restructuring is going to happen at some point. Peripheral tensions had eased in recent days, but they haven’t gone away.”The cost of insurance against a Greek default, via buying credit default swaps, also hit a new high at 1,139bp, implying it costs $1.14m a year to insure $10m of debt for five years.



• Ultimately we believe that if the idea is to get the debt back to a sustainable level then the target will be the Maastricht treaty limit of debt-to-GDP of 60 per cent. In order to reach that level, bonds will have to take a haircut of some 62 per cent,” he said.



• Polls suggest Finns could elect an anti-European Union leader at the weekend. True Finns, headed by Timo Soini, has been only narrowly behind the centre-right National Coalition party and investors fear an anti-EU Finland could hamper Brussels’ negotiations for Portugal’s bail-out and further progress in creating permanent rescue mechanisms.

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