New Greek Bonds Pay Stratospheric Yields

Anyone who thought the problem with Greek debt was in the rear-view mirror after last week’s debt swap probably also believes in the tooth fairy. The country issued new sovereign bonds this morning with terms of 11 to 30 years. The shorter term debt will cost Greece around 19%, while the long-term debt is a cheap 13%-14%. The inverted yield curve means most investors believe that Greece’s ability to pay is in doubt.

How risky is the new Greek debt? It’s priced higher than Portuguese debt, and most inverstors think Portugal could be due for a second bailout package any day.

The Financial Times cites an investment banker who said that it’s not all a one-way bet. There are “Greek institutions who will take a bet that they will get repaid in full, and banks and insurers who for accounting reasons will be unwilling to book all their losses on the bonds.”

In the immortal words of Inspector Harry Callahan: “Are you feeling lucky today?”

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