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Thursday, June 23, 2011

Greece Update and European Bond and CDS Spreads

by Calculated Risk on 6/23/2011 07:57:00 PM

First from the WSJ: EU Stops Greek Backtracking

European Union leaders fended off an effort by Greece to water down an austerity and privatization package that is the price for new aid, and EU President Herman Van Rompuy said they were nearing approval on a new rescue program to take Athens until the end of 2014.
"We have a deal after the Greek government agreed to more spending cuts and some higher taxes," said the [Greek] official.
More austerity ...

And here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released yesterday (graph as of June 22nd).

From the Atlanta Fed:
Since the April FOMC meeting, the 10-year Greece-to-German bond spread has widened by nearly 400 basis points (bps) through June 22. The spreads for Ireland and Portugal have soared by 157 bps and 199 bps, respectively, over the same period.
Euro Bond Spreads Click on graph for larger image in new window.

The spreads for Greece, Ireland and Portugal are all near record highs. The spreads for both Ireland and Portugal are about as high as Greece a couple of months ago!

Spreads for Spain and Italy have increased recently, but are still much lower than for Greece, Ireland and Portugal.

The second graph shows the Credit Default Swap (CDS) spreads:

Euro CDS SpreadsFrom the Atlanta Fed:
The CDS spread on Greek debt has widened about 500 basis points (bps) since the April FOMC meeting, while those on Portuguese and Irish debt continue to be high.
The Greek 2 year yield was up to 28.6% today. The ten year yield was up to 16.9%.