INVESTORS are now demanding a stunning 25.5 per cent yield to hold two-year Greek bonds, pushing Athens further down a disastrous path towards western Europe’s first sovereign default in over 50 years.
Yields on the bonds of other bailed out nations are also being drawn upwards as fears reach fever pitch: Irish two-year rates climbed to 12 per cent and equivalent Portuguese rates to 11.8 per cent.
Most significantly, Spanish yields are also creeping upwards, with two-year rates jumping over 3.6 per cent yesterday, although the rise is slower than for other peripherals.
Economists at Fathom Consulting said: “Investors appear increasingly convinced that some kind of debt restructuring by Greece is now inevitable, an event that ECB executive board member (José Manuel) González-Páramo this week described as having ‘a more negative systemic effect than the Lehman's collapse’.”
A Greek default is seen as a doomsday scenario in Brussels because it would prompt both a national financial crisis due to banks’ exposure to sovereign debt and an existential question over the single currency due to Greece’s need to devalue as part of restructuring its debts.