BUSINESS

Short-dated Greek yields near six-week high after IMF warnings

JOHN GEDDIE

TAGS: Markets, Economy

Greek two-year yields marched towards a six-week high on Wednesday after the IMF painted a grave outlook for its economy and renewed calls for its reluctant EU partners to grant substantial debt relief.

The warnings detailed in a draft IMF memorandum seen by Reuters come just as Athens and its creditors adjourned talks on its latest bailout review which have dragged on for months.

These delays have reignited concerns Athens may not have the cash to repay debts falling due in July and will not put its debt on a sustainable path to finally put to bed fears about its future in the currency bloc.

"The Greek situation is a problem that is going to recur at some point further down the line, it is just a question of when," Credit Agricole strategist Orlando Green said.

"The big issues about debt sustainability have not been removed despite the various bailouts that have been put in place."

Two-year yields rose 54 basis points to 11.57 percent on Wednesday, up more than 100 basis points from levels seen just before Greece and its lenders adjourned the bailout review in the early hours of Tuesday morning.

They are also within sight of the 11.84 percent touched last week, which was the highest level seen since late February, according to Reuters data.

Greece's benchmark ATG equity index underperformed a rally on other European stock markets. The ATG was down 0.1 percent by 0755 GMT, underperforming a 1.5 percent rise on the pan-European FTSEurofirst 300 index.

The latest review of Greece's progress on the terms of a bailout deal reached last July are expected to resume after this week's IMF spring meetings but differences among its lenders over the country's economic progress and resistance in Athens to unpopular measures remain.

The head of the euro zone's rescue fund said on Tuesday that the process has been "difficult", as Greece said it would submit pension and tax reform bills to parliament next week to try and bridge the gulf.

A positive review will unlock 5 billion euros in bailout aid, most of which will be used to repay 3.5 billion euros to the International Monetary Fund and the European Central Bank in July, and pave the way for talks over debt relief .

In its draft memorandum, the IMF said debt relief from Greece's European partners was "essential" but German finance minister Wolfgang Schaeuble has said he sees no need for debt restructuring.

The memo also showed IMF's projections on Greece's fiscal position in the coming years also lag far behind those of its EU partners.

[Reuters]

Online