Financial Times
March 8, 2011
Greece’s cost of borrowing hit the highest levels since the international community intervened to rescue the eurozone bond markets from imploding in May last year.
Greek yields leapt higher amid growing fears that the country will be forced to default on its bonds after a multi-notch downgrade by Moody’s this week.
One investor said: “The country’s debt to GDP [gross domestic product] is going to rise above 150 per cent. To reduce that, the Greek economy will have to grow very strongly or there will have to be some kind of restructuring.”
The yields on 10-year benchmark bonds jumped to 12.82 per cent, the highest level since Friday May 7 last year. The following Monday, the international community launched a €750bn rescue package for Greece.
The jump in yields, which also rose to highs not seen since May on three-year and five-year debt, came in spite of a positive short-term bill auction that saw good demand and priced at yields only just higher than the previous sale for similar debt.
The debt auction raised €1.62bn in six-month treasury bills at a yield of 4.75 per cent compared with 4.64 per cent in February. The bid to cover ratio was a healthy 3.59.
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