Greek Bonds Under Pressure

Bloomberg News/New York Times
May 20, 2011

Greek bonds led declines among peripheral euro-area nations Friday, sending 10-year yields to a record high, on concern the nation will have to reorganize its debt obligations as it struggles to reduce its fiscal deficit.

Separately, the International Monetary Fund said Friday that Ireland’s ability to sell sovereign bonds remains “elusive” and its situation may worsen unless the European Union develops a more comprehensive plan to deal with the region’s debt crisis.

Yields on 10-year Greek debt rose 53 basis points to 16.53 percent as of midday in London after reaching a record 16.55 percent. The 10-year German bund yield fell one basis point to 3.1 percent, making the spread between the two the most ever.

“The big headline of Greek debt reprofiling is really what defines the whole story,” said Ioannis Sokos, an interest-rate strategist at BNP Paribas in London. “It’s not a matter of if there’s a reprofiling. It’s a matter of when and how significant it is.”

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