By Rom Badilla, CFA – Bond Trader and BondSquawker
Greek bonds tumbled Monday morning as uncertainty over EU and IMF rescue aid continues. Questions surfaced among investors on if the troubled country will need to restructure its debt. Restructuring would entail booking loses for investors as well as time extensions on repayment.
Late last week, Greece called for activation of a financial lifeline of as much as 45 billion euros ($60 billion) as the country needs to finance 8.5 billion euros of bonds maturing May 19th. The Greek request needs approval from all 15 other euro- area countries including Germany, where surveys have shown public opposition to aiding Greece.
As of 11am EST, yields on the peripheral countries are soaring as the Greek yield curve is inverted.
Greece Yield Curve Change
2-Year Greek bonds jumped around 285 basis points to yield about 13 percent. The yield on the 5-Year is at 10.55 percent, an increase of 113 basis points while the yield on the 10-Year increased 75 basis points to 9.40 percent.
The yield on 2-Year Portugal bonds are higher by 70 basis points to 3.61 percent while the yield on the 5-Year is at 4.65, an jump of 42 basis points. The Portuguese 10-Year is up 28 basis points to a yield of 5.24 percent.
Portugal 5-Year Yield – Intraday Chart
The Spanish yield curve is flattening as well as 2-Year yields increased 20 basis points to 1.88 percent while Spain’s 10-Year bonds are yielding 4.06 percent, an increase of 8 basis points.
The Dollar Index is up by 0.2 percent to 81.475 while the Euro sinks by 0.3 percent to 1.3343 in the late morning session.
In the U.S. markets, bonds are up slightly as yields across the curve are down 1-3 basis points with the front end leading the way. The yield on the 2-Year is currently trading at 1.04 percent while the 10-Year is at 3.80 percent.
Equities are slightly up to flat with the S&P500 at 1218. The Volatility Index is higher by 0.5 points to 17.13.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.