ECONOMY

Greek bank bonds slide after premier refuses to extend program

Bonds of Greece’s banks extended declines, with notes of National Bank of Greece SA falling to a record, after Prime Minister Alexis Tsipras reiterated his government’s rejection of the country’s bailout program.

National Bank and Piraeus Bank SA were among the worst performers in Bank of America Merrill Lynch’s Euro Financial High Yield index. Tsipras said in Parliament Sunday he would roll back measures put in place as part of the international rescue package, including raising the minimum wage and restoring the tax-free threshold for individual workers.

The government is refusing to ask for an extension to the bailout deal, which expires at the end of this month, and is instead pushing for a bridging loan to gain time to renegotiate the terms. Depositors pulled more than 15 billion euros ($17 billion) from accounts in the run-up to the anti-austerity Syriza party’s election victory last month.

“Deposits are probably still running out the door and that means the banks are going to have to use emergency funding from the central bank,” said Ciaran Callaghan, an analyst at Merrion Capital in Dublin. “But the bigger that gets, the more it becomes a financial stability issue.”

National Bank of Greece SA’s 4.375 percent notes due April 2019 fell for a fourth day, sliding 4.2 cents on the euro to 59.5 cents at 11 a.m. London time, according to data compiled by Bloomberg. Piraeus Bank SA’s 5 percent notes maturing March 2017 fell 4 cents on the euro to 67.8 cents, the lowest in a week, the data show.

The price of credit-default swaps on Greek sovereign debt signals a 69.5 percent probability of default within five years. It costs $4.2 million upfront and $100,000 annually to insure $10 million of Greek debt for five years, according to prices compiled by CMA.

[Bloomberg]