Spread widens despite good news

Although the European Commission has given the green light to the country’s Stability and Growth Program, Greek bonds ended the day with losses, as the spread between the interest rate of the country’s benchmark 10-year bond and that of the German Bund grew wider yesterday. Although the spread shrank from 352 basis points late on Tuesday to 327 bp yesterday morning, by the evening it widened again to 355 bp, mostly due to the negative developments in Portugal. The market was somewhat shaken by the statement from Deputy Finance Minister Filippos Sachinidis, who said that «the real dilemma that the country is facing is bankruptcy or averting bankruptcy,» as he was speaking within the context of the measures announced on Tuesday by the prime minister. He added: «We have taken the politically responsible stance, to take the measures that will prevent the country from facing the risk of having its economic and foreign policy determined by others, outside Greece.» A French government official noted yesterday that «there is no worry anymore regarding Greece’s capacity to fund its requirements,» while everyone’s attention at home will now turn to this month’s issuance of 10-year bonds, as the government has already announced. Analysts believe that the challenge for the economy and the bond market is the application of the Stability and Growth Program. The extent to which its measures will be enforced will determine the rate at which Greece can borrow the money it needs.

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