Friday, January 29, 2010

Greek Debt Prices Continue to Decline

Bloomberg reports:
Greek bonds and credit-default swaps show investors are starting to doubt that the nation can reduce the largest budget deficit in the European Union without help from outside.

The nation’s government bonds are the world’s worst performers in January, losing 4.19 percent in local currency terms and extending their decline over the past three months to 10 percent, Bloomberg/EFFAS indexes show.

The yield on two-year Greek bonds rose for a fourth- straight day, adding 53 basis points to 5.74 percent as of 12:37 p.m. in London, the most since November 2000. Ten-year yields dropped 21 basis points to 6.94 percent, after climbing to 7.15 percent yesterday, the highest level since October 1999 and up from 4.99 percent on Nov. 30. The yield is more than 3.7 percentage points higher than benchmark German bunds, after widening to 3.96 percentage points yesterday, the most since October 1998.

Credit-default swaps on Greece fell to 397 basis points, from a record-high 422.5 basis points yesterday, CMA DataVision prices show. Swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is equal to $1,000 a year on a contract protecting $10 million of debt.

The swaps have risen from 121.8 basis points in October, and compare with 433.4 basis points for Dubai in the weeks before it received cash from Abu Dhabi on Dec. 14

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