In Brief
‘Adrenaline junkies’ opt for peripheral debt Irish government bonds fell, pushing the yield on the 10-year note up to a record versus benchmark German bunds, on concern European banks are vulnerable to losses on their holdings of so-called peripheral euro-region debt. The extra yield investors demand to hold Greek 10-year government bonds rather than benchmark bunds reached the highest level in four months. Pacific Investment Management Co fund manager Andrew Bosomworth said yesterday the Mediterranean nation faces a «substantial» default risk when its bailout program expires in three years. The Wall Street Journal said European stress tests of major banks understated some holdings of sovereign debt in the wake of Greece’s budget crisis. «You have to be an adrenaline junkie to be very active in those markets,» Frances Hudson, head of global thematic strategy at Standard Life Investments, said in an interview in London yesterday, referring to the debt of peripheral euro-region nations. «We aren’t heavy in any of the peripherals. It’s obvious people are going to buy German bunds for safety.» The Greek-German 10-year yield spread reached 942 basis points and was at 940 basis points as of 11.54 a.m. in London, from 914 basis points on Monday. The German-Irish 10-year spread climbed to 379 basis points, the highest since Bloomberg started compiling the data, from 343 basis points. The Portuguese-German spread was at 352 basis points from 333 basis points. The Greek-German spread reached a record 973 basis points on May 7, the day before the European Union and International Monetary Fund crafted a region-wide bailout package to ward off investors betting on the breakup of the euro. (Bloomberg) Slovakia faces EU anger on Greece decision BRUSSELS (Reuters) – Slovakia faced growing criticism and isolation at a meeting of European Union finance ministers yesterday over its decision not to contribute to an aid package for debt-ridden Greece. Several EU officials said privately that Slovakia could be snubbed by some of the 26 other EU member states because its decision is likely to complicate talks on the bloc’s budget, making the rich net payers less willing to grant aid to poorer countries. «Slovakia had agreed to this. The new government in Slovakia has reneged on this agreement. This is not acceptable,» Austrian Finance Minister Josef Proll told reporters. «We will pursue discussions. We want Slovakia to take their responsibilities more seriously in the future.» The parliament in Slovakia, the poorest of the 16 countries that use the euro, last month ruled against contributing 816 million euros ($1.05 billion) to a 110-billion-euro bailout fund for Greece. Deputies said taxpayers in a country that has kept its debt under control should not have to bail out a profligate one. Slovakia’s new right-leaning government opposed taking part in the bailout despite a pledge by the previous administration to support Greece, where the budget deficit had ballooned so much that it threatened the stability of the eurozone. Wind farms Public Power Corporation (PPC), Greece’s largest electricity utility, said yesterday it will pay up to 43.4 million euros ($55.5 million) to buy six wind farms from BCI Group. PPC’s board cleared the acquisition of the wind parks last week as part of efforts to become less dependent on lignite. State-controlled PPC aims to invest about 2 billion euros in renewables by 2015 to replace a total of 2,000 megawatts of old, polluting lignite plants as it shifts toward cleaner energy sources. The three wind farms have a total capacity of 24.65 MW and will be bought by PPC’s fully owned subsidiary PPC Renewables. The deal also includes the purchase of another three wind farms under development, with a total capacity of 48 MW. PPC said the construction budget for the three farms being built was estimated at 68 million euros, of which 51 million will be loans. The utility’s earnings fell 27 percent in the first half, hurt by high fuel costs, taxes and lower power consumption. (Reuters) Cypriot prices Cyprus’s EU-harmonized inflation rose to 3.4 percent year-on-year in August from a July reading of 2.7 percent, the island’s statistics department said yesterday. The HICP tracker recorded a 2.5 percent increase in the first eight months of the year compared to the corresponding period of 2009. (Reuters)
