Yields on Greek bonds have been under control since a second bailout agreement was announced July 21, but new fears that the agreement will not be fulfilled are sending them skyrocketing.
Yields on 2-yr bonds topped 45% this morning, a new record.
New fears that the bailout agreement could fail have surged since last week, when a bilateral collateral agreement with Finland spurred on other eurozone countries to clamor for the same thing. Such negotiations could delay a bailout indefinitely. Greece could experience an true (non “selective”) default if a bailout is not implemented quickly enough.
Finnish leaders met yesterday, pledging flexibility in their collateral demands. However, it’s difficult to forsee a solution which other eurozone nations will approve without their own individual agreements with Greece. Collateral was a make-or-break condition of Finland’s participation in the bailout, and is part of the bailout agreement. No other country was assured collateral by the agreement.