Greek bonds tumble as financing crunch nears

Greece’s bonds tumbled, pushing 10-year yields to the highest in more than two years, as pressure mounted on the southern European nation to secure funding or risk a possible default.

The price of Greece’s three-year notes dropped the most since February and Greek corporate bonds also slumped. Credit-default swaps suggested there was a 79 per cent chance of the country being unable to repay its debt in five years.

Greece's government, which came to power in January, is facing a financing crunch that Germany's finance minister says isn't likely to be resolved before a meeting of euro-area lawmakers next week. Officials from the country told their creditors earlier this month they might run out of money and could miss a repayment to the International Monetary Fund, according to people familiar with the negotiations.

Funds may be exhausted by May 12th, when money is owed to the IMF, Standard and Poor’s said on Wednesday, as it downgraded Greek debt.

IMF managing director Christine Lagarde on Thursday said Greek payment delays would not be recommended in the current situation. She added that the fund is concerned about the liquidity situationof all its debtors, including Greece,

"It will be hard to get an agreement reached by April 24th as hoped for by the Greek government," said Vincent Chaigneau, head of rates and foreign-exchange strategy at Societe Generale in Paris.

“That can carry on for a few more weeks. The road is narrow.”

At stake is the country’s €313 billion of government debt.

In the first two weeks of May, Greece must make payments to the IMF of €200 million and almost €800 million. It’s due to pay almost €200 million of interest on privately held bonds on Friday.

Yields on Greece’s notes due in July 2017 surged 281 basis points, or 2.81 percentage points, to 26.89 per cent. They earlier reached 28.23 per cent, the most since March 2012, when Greek bonds underwent the biggest restructuring in history.

Agencies