Reuters | Mon Apr 26, 2010 | 4:40pm IST
Uncertainty over an aid package for Greece pushed up its borrowing costs to a 12-year high on Monday, with demands from Germany for further austerity measures before aid is granted heightening the tension. Greece tried to reassure investors on Sunday that aid would arrive in time to avert the euro zone’s first sovereign debt default, despite signs that a 45 billion-euro ($60.49 billion) EU-International Monetary Fund package would have to be bigger. But the premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds hit a new 12-year high on Monday because of concern over the implementation of the aid package and the conditions attached.
"The market wants to see the cash laying on the table, not in a coffer besides the table," said David Schnautz, strategist at Commerzbank in Frankfurt. The backing of Germany, Europe’s biggest economy, is vital for any aid but Berlin faces public opposition to a financial rescue and is taking a tough line over the terms. "The government has not taken a decision (on aid)," German Foreign Minister Guido Westerwelle told reporters at a meeting of European Union ministers in Luxembourg. "That means that the decision can fall in either direction. Offering money too soon would get in the way of Greece doing its homework with the requisite diligence and discipline." Despite German pressure on Athens, markets kept pressure on Berlin to decide fast by pushing up the cost of insuring Portuguese government debt against default to a record high because of fears that Portugal could be next to debt crisis.
BBC News | Wednesday, 21 April 2010 | 15:35 GMT
The Greek government’s cost of borrowing has hit a new high as talks on a joint eurozone and International Monetary Fund (IMF) rescue plan begin. The interest rate on 10-year government bonds hit 8.3% – the highest since the euro was introduced. Rates rose as it became clear that talks over the aid package may not be finished until days before a multi-billion-euro loan is due for repayment. Investors are becoming more convinced that Greece will need to be rescued. Greece’s finance ministry said the talks with the European Commission and the IMF would take about two weeks, with a joint text issued on about 15 May. On 19 May, Greece is due to repay investors an 8.5bn euros (£7.3bn) bond.
The talks cover austerity measures that Greece must take during the next three years to reduce its 300bn-euro debt mountain. If all sides can agree the measures, it should help clear the way for a quick payout of up to 40bn euros on offer from eurozone members and the IMF. In a statement on Tuesday, Greece’s finance ministry said: "The discussions concern a three-year programme of economic policies… which can be supported with financial assistance from eurozone members and the International Monetary Fund should Greek authorities decide to request the activation of the mechanism."
Bloomberg | April 15, 2010 | 05:20 EDT
Greek bonds show the nation may have to tap a 45 billion-euro ($61 billion) international bailout to convince investors it can avoid a default. The 10-year securities fell for a third day today, and the yield premium investors demand to hold them instead of benchmark German bunds rose above 400 basis points for the first time since euro-region finance ministers announced the aid plan last weekend. The parliaments of Germany, France and Ireland must vote on whether to contribute their share of the loans, government spokesmen said yesterday. Dutch lawmakers will discuss Greek aid today. “There are concerns that the money will not be available,” said Toby Nangle, who helps oversee 46 billion euros as director of asset-allocation research at Baring Investment Services Ltd. in London. “There are people who are willing to place their own money at risk in anticipation of this thing not going through.”
Finance ministers said on April 11 the EU will provide Greece with 30 billion euros of three-year loans at an interest rate of about 5 percent if the nation requests the cash. The International Monetary Fund would provide another 15 billion euros. The agreement came after earlier pledges failed to convince investors that the government is able to narrow a budget deficit that is more than four times the EU’s limit for members.
Pimco Not Ready
Pacific Investment Management Co., which owns the world’s largest bond fund, said this week it’s not yet ready to buy Greek bonds. BlackRock Inc., the world’s biggest asset manager, said that donor countries need to demonstrate they can withstand a backlash from their citizens. “I don’t think Greece would go as far as waiting to be seen as failing in the market,” Christopher Pryce, a director at Fitch Ratings in London, said
Bloomberg | April 7, 2010 | 09:49 EDT
Greece may default on its debt as early as this year without “extraordinary” financial assistance from the European Union and International Monetary Fund, said Stephen Jen at BlueGold Capital Management LLP. The challenges facing Greece are similar to those that confronted Argentina, which defaulted on $95 billion of debt in 2001, as the government enacts austerity measures to narrow the European Union’s biggest budget deficit, Jen, managing director at the hedge fund, said today in an interview in London. That may drive the Mediterranean nation into a recession, he said. “A default may be ultimately unavoidable,” Jen said. “That eventuality may only be postponed by aid many times bigger than the 25 billion euros ($33 billion) people have in mind.” Any assistance needs to “impress the market,” he said.
Greek bonds fell for a second day, driving the premium investors demand to hold 10-year securities instead of benchmark German bunds to 407 basis points, the most since 1998. Market News International said yesterday the country wants to bypass IMF involvement in any EU-sponsored rescue because terms for aid would be too stringent. A Greek government spokesman denied the nation aims to exclude the IMF. Today’s declines pushed the yield up 12 basis points to 7.15 percent as of 2:48 p.m. in London. The spread averaged about 65 basis points in the five years through November before concern deepened that the country’s deficit would swell. Continue reading
Bloomberg | April 7, 2010 | 08:27 EDT
Greece may discover it’s no cheaper to sell bonds in the U.S. than in Europe as the government seeks to persuade investors it can plug the region’s biggest budget deficit. Investors may demand a yield of as much as 7.25 percent to buy Greek 10-year dollar bonds, 414 basis points more than benchmark German bunds and 331 basis points more than Treasuries, according to Paris-based Axa Investment Managers, which oversees about $669 billion. TCW Group Inc., which manages $115 billion in assets from Los Angeles, says Greece may have to offer a premium of as much as 400 basis points over Treasuries.
Petros Christodoulou, director general of Greece’s Public Debt Management Agency, said March 31 the country planned a “roadshow” in the U.S. and maybe Asia to drum up investor demand for a sale of dollar-denominated bonds. The country may offer as much as $10 billion of the securities, the Wall Street Journal reported the same day. Greece is struggling to tackle a budget deficit that is equivalent to 12.7 percent of gross domestic product, more than four times the European Union’s 3 percent limit. “U.S. investors won’t want to be paid less than what European investors are demanding,” said Stuart Thomson, who helps oversee more than $100 billion as chief market economist at Ignis Asset Management in Glasgow, Scotland. “The market wants them to say we would do what’s necessary to get funding costs down and if that means a more aggressive reduction in expenditure, then so be it.”