Sunday 4 December 2016

Restructuring of Greek debt is 'not imminent'

Published 01/06/2011 | 05:00

Jean Claude Juncker. Photo: Getty Images
Jean Claude Juncker. Photo: Getty Images

GERMANY'S government bonds were weaker yesterday and there was a better bid for Greek debt as investors dipped a tentative toe into riskier assets.

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Markets are firmer ahead of the conclusion of a review of Greece's progress in tackling its debt crisis.

The review, by the troika of IMF, EU and ECB, is due to finish up this week. As well as reporting on progress to date, many are expecting it to offer some details of how Greece will fund itself in 2012 and 2013, after its current bailout loans are fully drawn down.

Greece can't raise the cash it needs in the markets and fears that would lead to a default as soon as this summer have paralysed the market in recent weeks.

Now, however, as the review deadline approaches markets are betting against any radical change in the policy regarding a debt restructuring.

"Imminent restructuring is improbable when the EU's favoured option of bailout/austerity is still available," Gavan Nolan, a credit analyst at Markit, said last night.

He said trading yesterday showed many in the markets had become convinced a near- term restructuring of Greek government debt was unlikely.

He made the comments after the cost of insuring Greek bonds against a default fell.

However, he said many investors do still expect a restructuring down the line.

The yield on German 10-year government bonds rose above 3pc for the first time in a week, after getting as low as 2.97pc on May 27.

German debt is seen as a safe haven. When market sentiment is weak it actually boosts the German bonds so yield falls as investors clamour for the paper. Yesterday, it was Greek and Portuguese bonds that recorded falling yields.

The yield on 10-year Greek bonds dropped from 16.16pc to 15.8pc. Greek two-year bond yields fell from 24.5pc to 24.1pc.

Portugal saw smaller falls in its borrowing costs. The yield on Irish two-year bonds fell from 11.8pc to 11pc while 10-year Irish government debt was little changed on the day.

The rise in German bond yields reverses a month long trend that had been driven mainly by concerns of an imminent Greek crisis.

Yesterday's moves in the market suggest that investors are buying the line from European Union leaders, in particular those at the ECB that have ruled out a "total restructuring" of Greece's debt.

The EU would then formulate its plan for further aid to Greece, Jean Claude Juncker, head of the euro group, said.

Irish Independent

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