Greek, Irish, Italian Bonds Slide on Debt Concern; CDS, German Bunds Rally

Bloomberg
May 23, 2011

Greek and Irish bonds led declines in the securities of the euro-area’s most indebted nations, while the cost of default insurance rose and German bunds rallied, on concern that the region’s fiscal crisis is deepening.

Italian bonds dropped after the nation’s credit-rating outlook was revised to negative from stable by Standard & Poor’s on May 20. Yields on 10-year Greek and Irish debt rose to euro- era records, while those on Spanish and Portuguese bonds also climbed. German bund yields fell to a four-month low as a report showed European services and manufacturing growth slowed in May by more than economists predicted.

Today’s declines are “partly down to concern that policy makers will be unable to come up with any concrete solution to the debt crisis,” said John Davies, a fixed-income strategist at WestLB AG in London. “There’s a growing realization that a pain-free solution for Greece may not be there.” Today’s manufacturing and services data “suggest that we might be seeing a sharper slowing in growth than people were expecting,” he said.

Greek 10-year yields jumped 46 basis points to 17.03 percent as of 5:03 p.m. in London, while yields on two-year notes climbed 79 basis points to 26.25 percent. Irish 10-year yields advanced 32 basis points to 10.86 percent, with Italian securities of similar maturity up three basis points to 4.81 percent. The yield on Spain’s 10-year bond rose three basis points to 5.51 percent.

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