Euro Risk Signals Flash Red for a Third Day as Greek Talks Stall

  • Markit iTraxx Crossover index climbs by most since April
  • Greece doesn't plan to present new proposal in June 18 meeting

Indicators of risk surged for a third day across the euro zone as a Greek standoff with its creditors continued.

The Markit iTraxx Crossover index of credit-default swaps on high-yield companies climbed as much as 18 basis points, the biggest daily gain since April, and was up 12 basis points to 335 basis points at 12:35 p.m. in London. An index linked to the subordinated debt of financial companies rose to 176 basis points, the highest in almost eight months.

Greece is struggling to reach a deal with its creditors to allow it to avoid default, threatening its position in the currency bloc. The Greek government has no plans to present new proposals at a June 18 meeting because they would have to be agreed at a lower level first, Finance Minister Yanis Varoufakis said in an interview with Bild newspaper.

“You don’t want to be selling high-yield bonds into a weak environment, instead you buy Crossover to hedge,” said Andrew Lake, head of fixed income at Mirabaud Asset Management in London.

Talks on how to release as much as 7.2 billion euros ($8.1 billion) of bailout funds the country needs to meet its obligations collapsed after just 45 minutes at the weekend. Prime Minister Alexis Tsipras accused the nation’s creditors of “pillaging” his country for the past five years, according to a statement on Monday.

The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 30 European banks and insurers climbed five basis points to 89, the highest since April 2014.

Contracts insuring $10 million of Greek government debt for five years rose to $5.3 million in advance and $100,000 annually, according to CMA. That signals an 83 percent chance the government will fail to adhere to its commitments, compared with a near certainty of default implied before Greece restructured its debt in 2012. Outstanding contracts cover a net $586 million of Greek debt, Depository Trust & Clearing Corp. data show.

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