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Greek, Portuguese bonds hit record rates

Published on 15/04/2011

The long-term borrowing rates for Greece and Portugal hit record highs Friday, with Irish rates also pushing upwards as pressure for the troubled economies to restructure their debts increased.

At 0900 GMT Greek 10-year bond yields — the cost of long-term borrowing for the country — hit 13.176 percent, up from 13.156 percent the previous day.

The two-year bond rate was a thumping 17.899 percent, up from 17.829 percent on Thursday.

The corresponding 10-year rate for Portugal, which was recently forced to go cap in hand to its EU partners, was up to 8.826 percent from 8.767 percent.

“More and more people with the markets’ ear are evoking a restructuring of debt for several eurozone countries,” said Patrick Jacq, bond specialist at BNP Paribas.

For Mohamed El-arian, head of Pacific Investment Management Company, such a restructuring of Greek, Portuguese and Irish debt is inevitable with Spain the next contender for the kind of bailout package which has already been agreed for Greece and Ireland and is being organised for Portugal.

Germany conceded Thursday that Greece may have to restructure its debt but said such measures, if taken before 2013, would have to be voluntary on the part of its creditors.

The Portuguese and Greek bond yield rates are the highest since the introduction of the euro currency.

“We think that Portugal’s call for financial aid will dampen the fears but since there is no global and durable solution in place at the moment uncertainty is increasing,” another analyst said.

The other latest manifestation of the pressure on these indebted economies came Friday when Moody’s on Friday cut its credit ratings on Ireland by two notches to just above junk status, citing an “expected decline” in government finances that is set to hamper the indebted nation’s recovery.

The statement had the expected spiralling effect with Ireland’s long-term borrowing rate rising to 9.266 percent from 9.157 percent on Thursday.