Bond spread exceeds 200 basis points

The 10-year spread of Greek and German benchmark bonds exceeded the 200-point mark yesterday, two days after Greece auctioned off 8 billion euros in government paper. The spread reached as wide as 204 basis points yesterday, from 185 basis points on Wednesday and 164 at the end of May. It had remained under the 200-point mark for just a month, while in just nine days it has increased 40 basis points. This highlights the Greek government’s exposure to uncertainties in the international environment as each time investors become more risk averse, Greek bonds are hit. Greek bond sales volume yesterday reached 911 million euros, more than double the level of purchases, which amounted to 429 million euros. Investors, however, seem to be avoiding peripheral markets such as Greece. Latvia attempted to borrow money from international capital markets but failed. Additionally, it appears that the European Central Bank’s expected decison to keep interest rates unchanged had a negative impact on sentiment, as investors preferred to dodge riskier investments and deposit their funds in state bonds issued by larger countries. The structural problems of the Greek economy continue and the impression that there have been some improvements is proving incorrect, according to market sources.