Greek debt risk continues to climb

The cost of insuring Greek sovereign debt against default rose further to hit a record high as fears about forced selling of Greek government bonds and the fate of the European economy continued to weigh on peripheral eurozone bond markets. Greece’s five-year sovereign credit default swaps (CDS) were quoted at 1,075 basis points yesterday compared with 934 basis points on Wednesday, according to data provider CMA DataVision. That means the annual cost of insuring $10 million of Greek government debt for five years has risen a further $141,000 to $1.075 million, a record. CMA said that this price implied a 67 percent probability of default over the next five years. The rise also saw Greece overtake Argentina to become the second-riskiest sovereign borrower in the world, behind Venezuela. The previous peak in Greek government CDS came when they traded at around 950 basis points in May this year, before recovering on news of the 110-billion-euro rescue plan. The pressure on Greek bonds also continued yesterday, with the spread between the 10-year bond and benchmark German Bund widening to 791 basis points from 783 basis points on Wednesday. Meanwhile, Petros Christodoulou, head of the Public Debt Management Agency, said the European Union loan package has given the country leeway to focus on its fiscal consolidation measures and there’s no reason to expect a default. «The package we received gives us the luxury not to think about it at this stage,» Christodoulou said at a conference in London. «No one at the moment is looking at a restructuring in Greece, no one in Greece, no one outside Greece.» In regards to when Greece might issue bonds again, Christodoulou said: «It’s difficult to say. I can’t make a forward-looking comment on that.»