Although rumors of restructuring Greece's debt have been denied by Greece itself, the European Union (EU) and the International Monetary Fund (IMF), investors don’t believe them. Yield mounted on Greek bonds sold on Tuesday to a smaller group of international buyers.

Reuters reported that the yield spread between Greek 10-year bonds and German Bunds rose to 1,134 basis points, and 3-month bonds sold on Tuesday to raise 1.625 billion euros ($2.319 billion) cost the Greek government a 4.1% yield. That’s higher than February's auction, which paid 3.85%. Buyers were fewer as well, with only 36% of the issue going to foreigners compared with February's 60%.

Part of the unrest stems from statements from German government sources on Monday who were reported to have said that Greece could not make it through the summer unless it restructured its debt. Added to that was a report in a Greek newspaper that cited a senior European Commission (EC) official as saying that Athens realized it could not avoid restructuring.

The daily Eleftherotypia quoted an unnamed EC official's statement as, "The Greek government has realized that there is no other way and has accepted a mild debt restructuring." While a way to avoid that would be additional loans from the EU and the IMF, the official said this was highly unlikely. He went on to add, "With such high spreads and with a debt of about 1.5 times [annual] GDP, I think it is a matter of time when a mild restructuring takes place."

The German newspaper Die Welt had reported a similar statement by an unidentified Greek minister who said that it was only a matter of time until Athens had to restructure. He was quoted as saying, "The question now is no longer if we restructure but only when."

An EC spokeswoman strongly refuted the report, and was quoted saying, "It is a very firm denial on our side. It's impossible that such a statement can be correct considering that there is not even such discussions taking place between the European authorities and the Greek government."

Denials by officials have made little or no difference to markets, which have reacted accordingly. Such a move would have negative consequences for markets, pension funds, and banks, and fear of its inevitability is growing despite repeated insistence by officials that it would not be allowed to happen.

Juergen Stark, a member of the board of the European Central Bank (ECB), said in an interview with the Portuguese newspaper Publico that euro zone states carrying high debt levels could not restructure. He told the paper that "it would not solve the problem—on the contrary. If they really considered restructuring debt, they would have to pay in the future a higher risk premium." He added, "It has also an impact on the country's banking sector, which holds a huge part of the government bonds." He did not identify any single country.