Greek debt yields soar on deficit fear

Financial Times
April 26, 2011

Greek bond yields soared more than 1 percentage point to fresh euro-era highs as Athens failed to meet deficit targets and an adviser to German chancellor Angela Merkel warned the country would have to restructure its debts.

Greek two-year bond yields, which move inversely to bond prices, jumped 133 basis points to 24.34 per cent after it was revealed that the country’s budget deficit for 2010 was 10.5 per cent. Greek two-year yields have jumped about 10 percentage points in the past month.

The deficit was above the government’s February estimate of 9.4 per cent, although below the 2009 shortfall of 15.4 per cent of gross domestic product, the EU’s statistics office in Luxembourg said.

The cost of borrowing for Ireland and Portugal also rose to euro-era highs because of rising concerns that all three peripheral eurozone economies will be forced to restructure their debts. Irish two-year bond yields rose 75bp to 12.09 per cent and Portuguese yields jumped 21bp to 11.46 per cent.

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