Greek bond yields rise again

The deteriorating situation in Greece helped to push Germany’s 10-year borrowing costs closer to zero

Greece is still aiming for a deal with its creditors (Reuters)

Greece’s short-term borrowing costs hit another peak yesterday, as investor fears about the country’s ability to meet its debt repayments remained elevated.

The three-year government bond yield rose to 28 per cent in trading as the country’s eurozone creditors showed no signs of being prepared to release imminently the €7.2bn (£5.2bn) that Athens needs to meet its liabilities over the coming months.

Greek 10-year yields also rose more than 35 basis points to their highest level since late 2012 at 13.1 per cent.

In a sign of the increasing fiscal squeeze in the country, Athens was also forced to compel public sector organisations to transfer their idle cash balances to the central bank in order to maximise the chances of the country being able to repay its debts as they mature. The government is already tapping the reserves of state pension funds in temporary transactions.

The deteriorating situation in Greece helped to push Germany’s 10-year borrowing costs closer to zero yesterday as investors’ appetite for ultra-safe assets continued to grow. German 10-year yields retreated 1 basis point to 0.07 per cent, having fallen as low as 0.05 per cent on Friday. They have dropped 8 basis points in the past week.

“German government bond yields are inching closer to zero, and may well hit that mark” said Alan Higgins of Coutts Bank.

Belgium’s borrowing effective costs also fell on the back of the flight to safety as it became the sixth eurozone country to raise money by selling five-year bonds at a negative yield, following in the footsteps of Finland, Germany, Austria, the Netherlands and France.