Greece’s Bonds Slide as Government Seizes Funds to Avert Default

Greek bonds declined, pushing three-year yields to the highest since the nation’s debt restructuring in 2012, after the government issued a decree to force municipalities to transfer cash to the central bank.

The decision is another sign of the worsening situation as Greece remains embroiled in a standoff with creditors as pension and salary payments come due. The extra yield, or spread, that bondholders get on three-year notes instead of 10-year securities rose to almost 15 percentage points, signaling that investors are concerned they won’t get paid.

“Time is rapidly running out for an agreement this week and the market is increasingly nervous,” said Nick Stamenkovic, a fixed-income strategist at broker RIA Capital Markets Ltd. in Edinburgh.

Greece’s three-year yield jumped 183 basis points, or 1.83 percentage points, to 28.58 percent as of 4:02 p.m. London time. The 3.375 percent security due in July 2017 fell 1.940, or 19.40 euros per 1,000-euro face amount, to 62.005. The 10-year yield climbed 38 basis points to 13.27 percent.

Without the seizure of public-sector funds, Greece would not be able to pay salaries and pensions at the end of the month, two people familiar with the issue said. The new funds may be just enough to pay the salaries as well as make an International Monetary Fund payment, the people said.

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