Bond Traders realise The Greece Bailout Is A Joke

greek greece masks theatre

There’s this persistent belief that Europe can bluff the market by simply saying they have a plan to financially support Greece without making hard guarantees.

It’s not getting anywhere.

Even after the creation of an emergency facility backed by the IMF, Greek bond yields are rising, which means investors consider them more risky than before.


The yield on 10-year Greek government bonds has increased 25 basis points since EU leaders agreed to the aid blueprint on March 25, reaching a one-month high of 6.529 per cent yesterday. The yield eased to 6.525 per cent today, still more than double the rate on comparable German debt. Seven-year bonds sold by Greece on March 29 fell for a third day today.

The aid facility, a combination of IMF and EU bilateral loans, will only be triggered if Greece runs out of fund-raising options. Greek Prime Minister George Papandreou, who has to raise as much as 11.6 billion euros by the end of May, welcomed the plan last week as “very satisfying.”

Since then, the extra yield investors demand to hold Greek 10-year bonds instead of German equivalent has risen to 342 basis points, compared with 305 points on March 26. The yield on Greek two-year bonds rose to 5.17 per cent today from 5.119 yesterday.

Keep in mind that Greek credit default swaps exploded after a weaker than expected Greek bond auction, as well. Markets are still on pins and needles when it comes to Greece’s creditworthiness, and haven’t been assuaged by Europe’s repeated wishy-washy bailout plans.

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