Greek 10-year government bonds declined after European finance ministers avoided announcing specific measures to cut the nation’s budget deficit amid concern the crisis may thwart the region’s recovery.
The drop pushed the yield on the nation’s 10-year bond up the most in almost three weeks as European Union Economic and Monetary Affairs Commissioner Olli Rehn said the EU has ways and means to safeguard stability in the euro area. Officials meeting in Brussels today didn’t provide specific measures for Greece, a day after ministers told the country to ready more deficit-cutting measures. German bunds dropped.
The Greek 10-year yield increased 15 basis points, after earlier rising by the most since Jan. 28, to 6.39% as of 1:23 p.m. in London. The 6% security due July 2019 fell 1.01, or 10.1 euros per 1,000 euro face amount, to 97.19. The two-year yield increased 29 basis points to 5.44%, set for the highest close since Feb. 10.
The cost of insuring against losses on Greek bonds jumped, with credit-default swaps on the country’s debt rising 15.5 basis points to 370, according to CMA DataVision prices.
The premium, or spread, investors demand to hold Greek 10-year notes instead of German bunds, Europe’s benchmark government securities, widened by 13 basis points to 317 basis points. The spread reached 396 basis points last month, the most since the year before the euro’s debut in 1999, compared with an average of 57 basis points in the past decade.
Greek Economy Minister George Papaconstantinou said yesterday his nation is in a "terrible mess" and the government is "trying to change the course of the Titanic."
E.U. leaders promised to back Greece last week and are looking for guarantees it can deliver before they spell out what help they may offer. Greece has pledged to slash its budget deficit, the European Union’s biggest at 12.7% of gross domestic product in 2009, to 8.7% by year-end.
The country hasn’t asked the E.U. for financial support, Rehn told reporters in Brussels today. European Commission officials will visit Athens in coming days, he said. Greece is ahead of its own targets and will not require any bailout from the E.U., Papaconstantinou said today.
The German 10-year yield increased 1 basis point to 3.21%. France’s 10-year yield also rose one basis point to 3.53%.
Ireland’s auction of 600 million euros of securities maturing 2014 attracted bids equivalent to 2.8 times the amount on offer, down from a so-called bid-to-cover ratio of 3.9 times at a sale last month. The country also sold 900 million euros of 2020 bonds, attracting a bid-to-cover ratio of 2.3 times, the same as in a previous auction in September. Ireland’s 10-year yield increased two basis points to 4.75%.
Spain hired banks to sell 15-year bonds in euros, according to a banker involved in the transaction. Banco Bilbao Vizcaya Argentaria SA, Credit Agricole CIB, HSBC Holdings Plc, Banco Santander SA and Societe Generale SA are managing the sale, which will be benchmark in size, the banker said.
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