Global markets tumble as Greek fears escalate
Bond yields rise again to record levels for Ireland, Portugal as nerves prompt flight to safer assets
Published 24/06/2011 | 05:00
THE IMF held a meeting last night on how to manage government debt in South Korea as the crisis in Europe plunged share and debt markets lower yesterday.
The IMF met senior officials of 25 countries to discuss sovereign risk, government balance sheets and debt management.
Those talks and negotiations between European heads of government took place as nervous investors dumped risky assets.
Markets are working in the shadow of negotiations that are aimed at stopping Greece ending the summer in default, but sentiment was hit by a worse-than-expected assessment of the US economy by Federal Reserve Chairman Ben Bernanke. An unexpected fall in manufacturing output in China also hurt confidence.
The yield on Irish and Portuguese 10-year government bonds offered the biggest ever premium over German debt.
The yield on 10-year Irish bonds rose almost 0.5pc to 13.15pc last night; that is almost 9pc more than German bond yields. Portugal's 10-year bond yield was lifted from 13.1pc to 13.9pc as investors demanded more pay for owning the bonds.
The two-year Greek yield, which climbed above 30pc for the first time last week, was back to 28.64pc yesterday.
Yesterday Portugal led declines in the bond market but the yield on Italian two-year bonds hit the highest level in a month, as contagion threatened core European economies.
Moody's placed Italy's Aa2 local and foreign-currency government bonds under review for a possible downgrade on June 17 and noted the country's "long-term structural impediments to growth".
Rival ratings agency Standard & Poor's downgraded the rating for Anglo Irish Bank senior bonds to CCC.
That was four levels above default and will be lowered further if Michael Noonan gets his way and imposes burden-sharing on the bank's bondholders. Anglo Irish has €3.2bn of senior unguaranteed, unsecured bonds that would be hit if that happened.
The euro fell 1.6pc against the dollar and the cost of insuring government debt right across Europe hit a new high.
At home, the ISEQ Overall Index was hurt early as ECB President Jean Claude Trichet said the sovereign debt crisis threatened banks.
Oil and manufacturing shares were the biggest losers.
Elsewhere, European stocks hit a three-month low and share indices were knocked back in every western European market. (Additional reporting Bloomberg)