The cost of government debt is rising almost vertically in Greece today, and rumour has it that no-one is selling insurance against the debt’s default.
This follows news of a worse-than-expected Greek budget deficit of 13.6 per cent. Previous estimates pinned the deficit at 12.9 per cent.
Shorter-term debt yields are rising faster than those on longer-term debt (see chart). Insurance against the debt defaulting – in the form of 1-year credit default swaps – have risen to 1000, according to Markit (on very thin volume as willing sellers are scarce, if not absent). Essentially, the market is expecting a restructure within the year.
Data just taken from Reuters (source of chart) show 2-year government bond yields rising from 7.8 per cent yesterday to 10.38 per cent today, a jump of 2.55 percentage points. This is unprecedented in data back to 2004. Yields are now the highest they have ever been, at each maturity.
