- Major Eurozone banks are the holders of sovereign debts. In their books, they regard these sovereign debt as ‘AAA’ as good as cash. Of course, I am highly suspicious about the balance sheet of these banks. When the PIIGS default, one bank after another will topple, the western financial system will collapse!
Greek Bond Yields Climb to Record High on Speculation Bailout Will Fail
By Emma Charlton and Keith Jenkins, http://www.bloomberg.com/
Greek bonds slumped, with 10-year yields rising for an eighth day to a euro-era record, amid concern Finland’s demands for loan collateral jeopardize Greece’s second bailout package and may trigger a default.
German two-year notes gained after a U.S. report showed initial jobless claims unexpectedly increased last week, fueling concern the world’s largest economy is slowing and spurring demand for the safest assets. The spread between Greek and German 10-year yields widened to as much as 1,632 basis points, also the most since the euro was introduced in 1999. The benchmark Stoxx Europe 600 Index fell 1.2 percent.
“Markets are doubting whether the second bailout package will ever be ratified by all the euro-region member states,”said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “There’s not much that can worsen the situation from where we are now.”
Greek 10-year bond yields rose 45 basis points to 18.34 at 4:33 p.m. in London, after climbing as high as 18.55 percent. The 6.25 percent security due in June 2020 fell 1.16, or 11.60 euros per 1,000-euro ($1,437) face amount, to 48.970.
The two-year yield jumped 184 basis points to 45.87 percent, extending a 5.6 percentage point increase over the past two days. It earlier reached a euro-era record 45.91 percent. The cost of credit-default swaps insuring Greek debt rose three basis points to 2,253 basis points, the highest in more than a month, according to CMA.