Fight Among Greek Creditors Over "Explosive" Debt Sends Greek Bond Yields Soaring

Tyler Durden's picture

Greek 2Y bond yields soared, approaching 10% for the first time since September 2016, as an increasingly bitter fight between the nation’s creditors over its fiscal targets raised concerns it is running out of time to complete another review of its bailout program, and even sparked concerns a 4th Greek bailout may be in the offing. According to Bloomberg, the yield on Greek notes due in 2019 rose 79 basis points to 9.72% in afternoon trading in Athens. This particular issue was sold in April 2014 as part of a series of flagship sales that marked Greece’s "triumphal", if brief, return from market exile.

The yield on the 2019 notes, which was below 4% in 2014, climbed to as much as 37% in 2015, when failed negotiations led to a referendum that threatened Greece’s position in the euro-area.

The reason for the latest selloff - which due to the illiquid nature of Greek bonds may well be just one holder selling oddlots - is the ongoing stand-off with European authorities over the terms and future of Greece’s bailout has led to a rare public split on the International Monetary Fund’s board, amid growing questions over the fund’s participation. European institutions and the IMF have for more than a year been at loggerheads over what the fund argues are far too stringent fiscal targets being demanded of Athens by its European creditors and calls by the IMF’s staff for Greece to receive more long-term debt relief, the FT writes.

As Bloomberg adds, the talks with creditors for the completion of the second review of Greece's 86 billion-euro ($92 billion) bailout program has been stalled over significant differences between the IMF and euro area on projections for its economy, targets and debt sustainability. A deal between creditors is needed by a meeting of euro-area finance ministers in Brussels on Feb. 20, before the Dutch elections on March 15. After that, reaching a deal could become even trickier, with major maturities emerging which could force Greece into another technical default.

Greece won’t meet fiscal surplus targets set by its euro area creditors, the IMF warned on Monday, after executive directors met to discuss the fund’s annual assessment of the nation’s economy. The IMF’s assumptions aren’t based in reality and don’t take into account the reform of Greece’s public finances, according to a European Union official who spoke on condition of anonymity because the discussions are sensitive. To be sure, the IMF's assumptions are rarely if ever "based in reality", however markets are spooked by the increasingly acrimonious and public split among members of the Troika.

“It all hinges on talks with creditors which is typically a very difficult type of risk to price for investors,” Antoine Bouvet, Mizuho International interest rates strategist said by e-mail. “It is possible to imagine that some investors prefer waiting for the uncertainty to be resolved before re-investing this market.”

European institutions and the IMF have for more than a year been at loggerheads over what the fund argues are far too stringent fiscal targets being demanded of Athens by its European creditors and calls by the IMF’s staff for Greece to receive more long-term debt relief. The battle has raised questions over the IMF’s financial involvement in the current €86bn bailout, with German officials again on Monday saying that without the fund’s participation the rescue programme would end, potentially causing a new funding crisis for the government in Athens.

In an as-yet unpublished report on the Greek economy, the IMF’s staff argue that Greece’s debts are unsustainable and on an “explosive” path to reaching almost three times the country’s annual economic output by 2060.  But that report, the FT writes, has been labelled overly gloomy by European officials. Moreover, after a meeting to discuss it on Monday the IMF issued an unusual statement conceding that its board was split over its findings.

“Most” of the 24 board members “agreed with the thrust of the staff appraisal” contained in its regular “Article 4” review of the Greek economy, the IMF said. However, “some . . . had different views on the fiscal path and debt sustainability”.

“Most directors agreed that Greece does not require further fiscal consolidation at this time, given the impressive adjustment to date which is expected to bring the medium-term primary fiscal surplus to around 1.5 percent of gross domestic product,” the IMF said. “The interesting thing was that ‘most’ directors didn’t ask for more austerity but just for a budget-neutral policy re-balancing,” said Thanassis Drogossis, an analyst at Athens-based Pantelakis Securities.

The IMF’s report is based on assumptions that are incorrect and misleading and would lead to the IMF having an inaccurate analysis of Greece’s debt sustainability, the EU official commented. Euro area considers the country’s debt to be sustainable after the implementation of the short-term debt measures decided by the Eurogroup.

On Tuesday, Greek government spokesman Dimitris Tzanakopoulos told reporters in Athens that Greece will only agree to bailout measures that are socially sustainable and will allow the country’s bonds to be admitted to the European Central Bank’s Quantitative Easing program. The IMF is causing needless delays, and the government will take initiatives in the coming days to try to bridge the differences between the sides, he said. The standoff is the latest in a long line of disputes that have buffeted Greek bonds since the nation regained market access.

“Despite Greece’s enormous sacrifices and European partners’ generous support, further relief may well be required to restore debt sustainability,” the IMF insists, adding that debt relief needs to be complemented with strong policy implementation to restore growth and sustainability.

As of this moment, there is little clarity on what happens next. A recent report from Credit Suisse laid out five possible scenarios, ranging from the benign to the horrific, as follows:

  •     Scenario 1:Quick resolution (in the coming days)
  •     Scenario 2: “We need more time” (March-April)
  •     Scenario 3: brinkmanship (July)
  •     Scenario 4: Early elections (before the summer)
  •     Scenario 5: Grexit? Oh pleeease!

A timeline of key events in the coming weeks will help investors as they gauge the risk of yet another Grexit:

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VinceFostersGhost's picture



Maybe you guys should spend less money.

dark fiber's picture

Why should a fuck be given about that basket case anyway?

eforce's picture

Greece to the EU is like HK to China, a timebomb.

VinceFostersGhost's picture



All western world cares about TRUMP


The western world can't have Trump.......he's OUR President.


Heard he can't speak in England.........screw'em........and we're keeping that bust of Winston Churchill BTW.


We're also keeping that bust of MLK as well.

random999's picture

you know.. bailing them out again... its kinda embarrasing.

Everyone knows Greece willl fail sooner or later, but until then, bail them out a few more times so that the EURO can live for another day.

new game's picture

what part of runny shit swirling the toilet bowl don't i not give a shit about?

halcyon's picture

Maybe you should learn some basic accounting and economic history.

1. Most of the Greece money is stolen by the two families "running" Greece for the past 60 years. Stolen and deposited into Switzerland.

2. Greece has already cut deep and hard and of course it totally kills their GDP. They are being strangled by too strong euro (for them).

3. Most of their money is going into servicing debt, which was caused by the political thiefs (see 1).

What they need is:

- revolution

- kicking the two families out of the country

- leave EURO

- Leave EU

- side with Russia for more energy deals

- side with China for better shipping deals

- devalue the new drahkhma

- Get exporting again

But of course they can't, because they are being blackmailed by ECB, World bank and IMF.



Dilluminati's picture

Your "reedeekculous cunt" the answer is very simple!

Import more muslims who can then masturbate in public to revitalize the economy! /scasm

The left has only one solution for their mismanagement and that is to grow an economy by importing useless eaters and dependents of the state and running even larger deficeits destroying more of what remains of middle class and skilled professionals.

We should all quit our jobs and get basic income under their monopoly schemes and be their serfs /scasm



GunnerySgtHartman's picture

This fighting amongst Greek creditors reminds me of a group of bums fighting over a scrap of bread - there's not enough bread to satisfy any one of them, and yet all of them fight to the death for it.  The same thing is happening with Greek creditors.

PontifexMaximus's picture

At least investors get some yield with the insurance policy of supermario for free

Ghordius's picture

and another Greek debt rebalancing saga

and yet, I am missing here a very important part of the story:

the new dollar-denominated debt that Greece has. but even mentioning it would spoil certain narratives, so I doubt somebody will pick up on this story

BandGap's picture

I'm buying with both hands! /sarc

VinceFostersGhost's picture



I'm nominating you for sainthood......just as soon as I'm done with breakfast.

SoDamnMad's picture

Must be ThyssenKrupp didn't find that special "extra" in their quarterly payment check for the submarines that don't work.

1777's picture

Buy the bottomless void!


BigWillyStyle87's picture
BigWillyStyle87 (not verified) Feb 7, 2017 7:42 AM

Another snoozefest, I've seen this movie before.

spanish inquisition's picture

Stay away from roadside bankers if you want to avoid explosive debt.

JohnGaltUk's picture

There are Greeks that are'nt even born yet that will be paying that debt in 2060. Sounds totally fair to me.

Vilfredo Pareto's picture

I thought generational bondage was considered an evil in enlightenment era thinking.


Now it is a Krugmanesque virtue lol

Last of the Middle Class's picture

"Greek bond yields soaring" is not dissimilar to " I'll take a hamburger today for which I will gladly pay you next Tuesday". About the same IQ level also.

wmbz's picture

It's Greece, stick a finger in the dyke, plug the hole from behind, kick the can, roll it over...Who gives a shit!

shizzledizzle's picture

The check's in the mail Mario!

hooligan2009's picture

truth: Greece is bankrupt and it's huuuuge debt is caused by unaffordable deals with Franch (military deals) and Germany (railways) plus staging an Olympics.

truth: the EU and the ECB are in de danube - ok, de nile - ok, denial that Greece is bankrupt, since they have spent billions of Euros over the last five years in administering the collapse of Greece, rather than paying off the debt of Greece.

truth: italy, spain and france are just as bankrupt as Greece and no amount of LTRO/QE/NIRP is going to alter the fact that libtard socialism results in only one outcome - the inevitable grinding path into government debt default from persistent fiscal deficit.

truth: profligate spending by the EU on trade subsidies, trade tariffs, welfare payments for the indigenous population PLUS another 3-4 trillion euros that needs to be spent on economic immigrants (NOT REFUGEES, IMMIGRANTS) from outside the EU shows that politicians of the EU countries are transient, the EU is permanent.

truth: no EU country is accountable to the promises it made as a signatory of the Maastricht Treaty (maximum 60% government debt to GDP and 3% fiscal deficits).

truth: the EU has no common standards for health, education or welfare and refuses to allow health migrants within Europe to get treated where excess provision in one country could be used to meet health care needs in another. unemployment benefits are not the same in all countries and education standards are different - much like degrees in India, the US and China all have different levels of ability required for each.

truth: neither Corporal Schulz or Mutti Merkel have ever solved any problem - EVER of any substance other than their own tax-payer funded trough feeding.

shovelhead's picture

"When it's serious, you have to lie".

Dilluminati's picture

This has been beyond a debacle since the IMF admitted that their refininacing wasn't helping.  Now that is extrordinary because more debt is never the answer to too much debt, but just how bad?

In an as-yet unpublished report on the Greek economy, the IMF’s staff argue that Greece’s debts are unsustainable and on an “explosive” path to reaching almost three times the country’s annual economic output by 2060. 


That folks is the defintion of toilet loaf represented as debt

youngman's picture

This really is just the bankers ..paying off the bankers..themselves..... to make them look good.....and keep their jobs and big salaries...

back to basics's picture

A few of things to add here.

ONE, surging yields on Greek 2YR notes means sweet fuck all to the Greek economic drama. Less than 5% of Greece's total debt is in private hands and these notes are on the market for appearances only. They are simply not traded.

TWO, the ONLY credible scenario is the one where Tsipras capitulates yet again and passes the measures the IMF demands. They will be sold as "just in case" measures to be enacted only in case Greece fails to meet the 3.5% primary surplus target. But since the Tsipras government is confident the 3.5% target will be achieved, not to worry, no harm done, they will never be enacted. Tsipras will be competely obliterated if he calls a snap election because he has no platform. Every one of his lies has been exposed, he has nothing to run on, therefore he will not call elections.

The whole situtation has reached theater of the absurd levels. The IMF doesn't believe 3.5% primary surplus is achievable but demands measures that aim to achieve exactly that. The IMF on the one hand claims the Greek debt is massively unsustainable yet on the other hand offers no haircut, either from its own loans or suggests one on the debt held by the EU and the ECB, but rather only maturities extention. The ECB claims the debt is sustainable when by 2060 it is forecasting that 57% of Greek government revenue will be needed to service the debt (Greece is not paying off capital on these loans, just interest) when less than 5% is spent on a public health care system that has been utterly destoyed. The numbers don't add up and they are not socially responsible. And the EU, the ESM included, claim that great progress has been achieved in the Greek program when real unemployment has risen to 31% despite a huge exodus of young unemployeed people leaving the country for greener pastures. 

It's time EU politicians tell their electorate the truth, that Greece has been sacrificed to save French and German banks and utlimately the euro itself, and write that debt off before more Greek people die in the name of the euro. Suicides in Greece have risen 1500%, the time the avearge Greek lives has been reduced by three years (easy to achieve when treatment for serious deseases in Greece has virtually ceased to exist for most people) and infant deaths at birth have doubled.




hooligan2009's picture

yep, the truth is out there. unfortunately, the liars, cheaters and stealers are as well, bleh.

Vilfredo Pareto's picture

You do wonder if people are intentionally blind or know that they are just kicking the can as far as possible so that they buy a few more years for themselves before it falls a part.    


Of course the total pain is worse that way.  Had all creditors taken a 90 percent haircut in the beginning greece would be fine by now.

JimmyRainbow's picture

but dont forget that "people in syria are dying thx to assad"-blabla.

and ukraine. bla bla bla bla

the west is rotten to the bone, accusing everyone else of moral corruption.

what a shit world.

1777's picture

We need some more debt-based currency stat!

JimmyRainbow's picture

very slow state slaughter on tv, disguised as a rescue mission of the slaughtered.

nice trick. moral corruption elsewhere? reported as "on the rise".

angry_dad's picture
angry_dad (not verified) Feb 7, 2017 8:58 AM

The greeks will be happy to send all of their creditors a few million immigrants in lieu of payments.

Are these creditors sure they don't want to renegotite those debts?


Vilfredo Pareto's picture

Too late.


Greece is fenced in at the borders.  

wholy1's picture

Seriously doubt there is any remaining bounce in the "dead cat".

Vilfredo Pareto's picture

Whatever it takes, eh?


A fourth, then fifth, then sixth bailout?   If Europe is willing to permanently subsidize Greece it could work.  Surely no one thinks there is any other resolution short of default?

CRM114's picture

The International Banking Ponzi,it has been suggested,could carry on forever with the Fed,etc,simply printing new money and finding new ways to fudge all the statistics.

However, I think there are two reasons the dam will crack. The first is national revolutions. Greece is unfixable by everybody else's standards. Always has been; it's been bankrupt for half its national existence, and this is Episode 5. When the pensions and healthcare, etc, drop to the point where the turmoil of revolution looks no worse, there will be one. Three years tops. In the past this made no difference. The Greeks went back to fish and olives and happy poverty, and a new bunch of crooks took over in Athens. Now it's part of the EU, and trade, and diplomacy. What happens after Greece revolts now is turmoil across Europe, especially with the migrants, and will be financially crippling to the EU never mind anything else.

The point underlying all this is that socialism is deeply inefficient, and the migrants have blown a big hole in an already sinking ship. The UK is next. Sweden is a basket case already but no one will admit it.

The second is arrogant greed. The wholesale stripping of national assets by the rich can only proceed if everybody plays along, but there actually isn't any unanimity or control among them. Sooner or later some big players will get too greedy or do something too stupid, and the house of cards will collapse.

LightBulb18's picture

Imagine if lepen wins, and the euro dissolves, those greek bonds would be worth nothing...