Greek 10-year bond yields and credit default swaps surged to a record high on Tuesday as borrowing costs increased at a government debt sale ahead of a European leaders meeting this week aimed at containing the sovereign debt crisis.
Greek bond losses extended declines to a ninth day after the nation?s credit rating was cut by Moody?s on Monday.
?There is quite a lot of peripheral supply that needs to be digested and apparently we?re struggling to find more buying interest at these levels,? Marcel Bross, a fixed-income strategist at Frankfurt-based Commerzbank, told Bloomberg. ?We have these important meetings coming up where we see some potential for disappointment.?
The yield on 10-year Greek bonds jumped as much as 50 basis points to 12.83 percent, the most since 1988, with the increase in yields the biggest since late October. The extra yield investors demand to hold the securities instead of German bunds widened to as much as 956 basis points, the most since January 10.
Credit default swaps insuring Greek government bonds rose five basis points to an all-time high 1,037 basis points, meaning it costs $1.04 million annually to insure $10 million of debt for five years.
Greece sold 1.6 billion euros of six-month T-bills on Tuesday at an average yield of 4.75 percent, up from 4.64 percent previously, debt agency PDMA said.
Investors bid for 3.59 times the securities offered, down from 4.54 times at the earlier sale, with foreigners snapping up nearly a third of the issue, according to PDMA sources.
Along with Portuguese and Irish bonds, Greek paper is sliding before Friday?s meetings of policymakers culminating in a summit of European Union nations on March 24-25 that is intended to approve a package of measures designed to calm the region?s bond markets.
Austrian Chancellor Werner Faymann told reporters in Vienna on Tuesday that the nation opposes easing the conditions of Ireland and Greece?s bailouts. Faymann said that he?s ?against changing the existing agreements? for Greece and Ireland, which last year received emergency rescue packages totaling 195 billion euros.
Separately, the International Monetary Fund said in Washington that it?s confident the emergency bailout program for Greece will succeed, despite the Moody?s downgrade.
?We are confident that Greece will succeed, that the Greek debt is sustainable, and that our program will be successful,? said Antonio Borges, head of the IMF?s European Department, told Dow Jones in Washington late on Monday.
?This is not the first one, and probably not the last one,? he said of Greece?s downgrade.