May 9, 2011
Greek bonds dropped, leading declines by the securities of Europe’s most indebted nations, as the country’s credit rating was cut by Standard & Poor’s.
The losses pushed the spread investors demand to hold the securities instead of similar-maturity German bunds to the most in almost two weeks, while the cost to insure Greek debt climbed to a record. Two-year yields in Portugal and Ireland climbed to all-time highs. Greece needs “a further adjustment program,” Luxembourg Prime Minister Jean-Claude Juncker said after an unscheduled meeting of finance ministers last weekend. Bunds rose on demand for the safest assets as data showed European investor confidence fell more than economists predicted.
“Greek yields are still too low,” said Michael Markovic, a senior fixed-income strategist at Credit Suisse Group AG in Zurich. “For us, the sell-off in Greek bonds since the middle of April has been more than justified.”
The yield on the security climbed 20 basis points to 15.71 percent as of 4:15 p.m. in London. The spread over German bunds widened 28 basis points to 1,261 basis points, the most since April 27 based on closing Bloomberg generic prices. The two-year note yield jumped 25 basis points to 25.58 percent.
Credit-default swaps on Greek debt rose 30 basis points to a record 1,371, according to CMA. Swaps on Ireland reached an all-time high of 681 basis points, and contracts on Portugal also rose.
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