Sovereign debt crisis “is still with us”, warns analyst.
The yields on Greek debt have risen sharply on news that the IMF will send a team to offer “technical assistance” on fiscal restructuring to the country.
Jeremy Batstone-Carr, an analyst at Charles Stanley Research, notes in a research paper today that the country’s sovereign bond yields “didn’t just rise, they sky rocketed” yesterday, at one point increasing by 250 basis points on its six-month debt. Yields on one-year bonds rose by 150 bp and on 10-year notes by 44 bp.
Batstone-Carr adds that the country must return to the market in May or June to fund debt roll-over at interest rates of 7%, levels which if sustained, he says, “will surely bankrupt the country”.
“The sad fact is that there is, at present, no way that Greece can escape this vortex into calamity,” he writes. “The country lived beyond its means, borrowing incessantly from overseas investors for too long and only its involvement in monetary union has preserved it from a classic “run on the drachma” that drives those countries without the luxury of an EU safety net to the wall.”
He adds: “If Greece falls, so can Portugal, Spain and even Italy in a worst case scenario. The sovereign debt crisis is still with us. Talk of a depression amongst Western industrialised nations may be less far fetched than many care to imagine.”
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