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."