- The Eurozone sovereign debt bomb is about to explode! You cannot solve a debt problem with more debts at exorbitant interest rates! Do we really believe that Greece will not default when 1 year Greek bonds are at 60%, 2 years Greek bonds at 46%? This coming collapse will start in the Eurozone, bring down the financial/banking system and spread to UK, Japan and finally USA. Of course, by the end the whole world will be ‘in flames’! No country will escape this coming collapse.
Greek Bonds Plunge on Aid Deal Worries
By NEELABH CHATURVEDI , http://online.wsj.com/home-page
LONDON—Greek bonds fell sharply with two-year and five-year yields hitting euro-era highs as investors trained their guns back on the cash-strapped ountry amid signs of discord over a bailout package. Bonds issued by other highly indebted euro-zone countries also fell as traders fretted over the Italian government’s ability to push through fiscal tightening measures.
The two-year Greek bond yield rose by 2.64 percentage points to 45.92%, widening the yield spread over similarly dated German schatz by 2.47 percentage points to 45.39%. The five-year yield rose by 0.83 percentage point to 28.56%, while the 10-year yield climbed by 0.16 percentage point to 17.54%.
Sovereign Debt Worries Flare Again in Europe
By MATTHEW SALTMARSH AND NIKI KITSANTONIS , http://www.nytimes.com/
LONDON — Concerns about the euro zone’s ability to cohesively respond to its debt crisis resurfaced Friday after talks between Greece and its foreign creditors were interrupted and the head of the European Central Bank warned Italy to stick to its austerity program.
European stocks were sagging even before a disappointing U.S. jobs report added to concerns about the global economy, dragged lower by those companies most tied to growth like car makers, banks and insurers.
Yields on 10-year Italian bonds rose almost a tenth of a percentage point to 5.21 percent — well above the 5 percent level that is considered to be the top rate desired by policy makers.
The yield on Spain’s 10-year securities climbed slightly to 5.06 percent, despite passage in the lower house of the Spanish Parliament on Friday of an amendment that will enshrine stricter budgetary discipline in the Constitution.
The E.C.B. on Aug. 8 began the extraordinary step of buying Italian and Spanish debt to help calm markets after 10-year rates had spiked to around the 6 percent level.
“There’s still no genuine investor demand for Spanish and Italian government bonds,” he said. Sentiment was hit after the team of European and International Monetary Fund officials pulled out of Athens early as they apparently disagreed over the country’s deficit figures and how to make up for a growing budget shortfall. The mission had been sent to determine whether Greece would meet the conditions for the next tranche of emergency loans, due in September.
An initial loan package, agreed to last year, has since been supplemented by a second bailout deal that was hammered out in Brussels in July, but which now hangs in the balance amid demands by some euro zone countries for guarantees from Greece in the form of collateral. Without that fresh aid, Athens could default on its obligations.
One issue that dominated talks, which concluded in the early hours of Friday morning, was a deeper-than-expected recession in Greece that would necessitate “some additional elaboration to ensure there is no divergence” from deficit reduction targets, Mr. Venizelos said.
Mr. Venizelos also said that Greece’s economy was expected to contract by “up to 5 percent” but would not give a figure for the Greek budget deficit, broadly expected to overshoot a deficit target of 7.6 percent for 2011 by up to one percentage point.
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