Athens: Greece's bonds and credit ratings are factoring in a third bailout for the nation that analysts and investors say will require greater concessions from its international creditors.
Within a week of euro-area member states giving their formal approval to a second bailout package for Greece, the International Monetary Fund said the country may require additional funding or a further debt restructuring. Pacific Investment Management Company, which runs the world's biggest bond fund, said it remains "cautious" on euro-area government debt even after the largest-ever sovereign refinancing because the risk remains that Greece will leave the single-currency area.
"It's still a very steep mountain to climb," said Harvinder Sian, a senior fixed-income strategist at Royal Bank of Scotland Group Plc in London. The restructuring deal "doesn't do anything to put Greece on a sustainable path", he said. "A third bailout will become necessary."
The price of Greek government bonds maturing in February 2042 that were provided as part of its debt exchange was at 21.48 cents on the euro in early morning in London, with yields at 15.02 per cent. Standard & Poor's said on March 15 it rated the securities CCC, its fourth rank above default, citing questionable growth prospects, a weakening political consensus to implement budget cuts, and a "still large" debt burden.
Default swaps
Sellers of credit-default swaps on Greece will have to pay as much as $2.5 billion to settle contracts triggered by the nation's debt restructuring, an auction determined on Monday.
Yields on Portuguese bonds due in 2037 were at 11 per cent, with the price at 41.835 cents. The securities are rated BB by S&P, six steps above the new Greek securities.
Greece's ratio of debt to gross domestic product will fall to 116 per cent in 2020 from 165 per cent in 2011 if the nation's "ambitious" programme to overhaul the economy is implemented, according to a report posted on the website of the European Union's executive arm last week.
Don't want to take risk
Pacific Investment Management Company said it is avoiding the debt of Greece, Ireland and Portugal and sees a "significant risk" the former will leave the 17-nation euro region. A key risk is that Greece's "forthcoming elections in early May will usher in a government that is more hostile to the Eurozone and the IMF's demands for fiscal austerity," Andrew Balls, London-based head of European portfolio management, said in an interview published on the company's website on Monday.
