Greece Leads Jump in Sovereign Debt Swaps After Austria Says Aid Withheld
Greece led a surge in the cost of insuring European government debt after Austria threatened to block its next transfer of European Union funds because the nation isn’t meeting tax revenue and deficit-cutting targets.
Credit-default swaps on Greece soared 86 basis points to 944, the highest since June 29, according to data provider CMA. Contracts on Ireland rose 22 basis points to 515, Portugal climbed 13 to 426, Italy increased 7 to 188 and Spain was up 8 at 259.
Austrian Finance Minister Josef Proell said Greece’s progress in meeting its commitments “doesn’t give us any reason to approve the December tranche.” The Greek budget deficit for last year was revised to 15.4 percent of gross domestic product from 13.6 percent by the EU yesterday, just six months after it agreed a bailout with the EU and International Monetary Fund.
“It’s probably just political posturing, but it was enough to cause a little panic,” said Peter Boockvar, a strategist with Miller Tabak & Co. in New York.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments was 7 basis points higher at 168. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net; Mary Childs in New York at mchilds5@bloomberg.net
To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net
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