The odds of Greece defaulting on its sovereign debt within the next five years stood at 98% on Tuesday, as additional measures taken by its government failed to reassure investors and the cost of insuring the obligations climbed again.
However, German Chancellor Angela Merkel spoke over objections within her party to say that the Greek government was taking the right actions to obtain its next bailout loan, and said that allowing the country to default would bring trouble on other euro zone nations.
Bloomberg cited a standard pricing model as the source for the odds on Athens failing to sustain itself. It assumes that investors would recover 40% of the face value of Greek bond holdings in the event of a default. The report said that CMA, owned by CME Group Inc. and compiling prices quoted by dealers in the privately negotiated credit-swaps market, lowered its recovery assumption to 38% percent late Monday. A Reuters report put the odds of default within five years at 90%, citing CDS pricing data provider Markit.