Greek bonds tumbled today, driving the premium investors demand to hold the nation's 10-year notes rather than German bunds to a record 6 percentage points.
Analysts said Greece's request for a €45 billion bailout doesn't reduce the risk of default next year and a debt restructuring will be a "necessity" without even more aid.
Finance minister George Papaconstantinou said yesterday investors will "lose their shirts" betting against the nation as the European Union and International Monetary Fund rescue will prevent a restructuring.
Greece's finances remain "stretched in the medium term, even if the promised support provides some relief in the short term", said Gary Jenkins, Evolution Securities' head of credit strategy in London. "EU/IMF funding is only sufficient for about one year, and unless the amount made available to Greece is increased significantly and/or market sentiment does a U-turn, a restructuring looks like a necessity."
The cost of insuring the nation's debt against default increased 4.5 basis points to 619, according to CMA DataVision prices for credit-default swaps. A basis point on a swap contract protecting $10 million of debt for five years is equivalent to $1,000 a year.
Greece's borrowing requirements for this year total €45 billion as it struggles to return its deficit
below the EU's 3 per cent limit by 2012, Mr Jenkins said. It has already raised €18 billion through bond sales, leaving it with €27 billion needing to be financed over the rest of 2010, he said.
The country's funding needs over the next two years will be "at least as high as this year's as higher redemption payments offset the planned reduction in the deficit", Mr Jenkins said.
Bloomberg