LONDON: The premium investors demand to hold Greek government bonds rather than benchmark German Bunds topped 1,000 bps for the first time since May 2010 on Thursday as markets priced in a higher chance of a debt restructuring.
While the bond market had already priced in a high risk of restructuring in debt-laden Greece, comments from the German finance minister on Wednesday have triggered fresh concern that holders of Greek debt could face losses.
The Greek/German 10-year government bond yield spread rose to 1001 basis points, 33 bps wider against Wednesday's settlement close.
Earlier, yields soared in the two- to five-year sector of the curve where capital losses resulting from a haircut would be greatest, though traders said wafer-thin liquidity was also exaggerating price moves.
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