(Bloomberg) -- Greek bonds plunged, driving two- year yields above 11 percent, after the European Union said the nation’s 2009 budget deficit was larger than previously stated and Moody’s Investors Service cut its credit rating one step.
The cost of insuring against default soared, rising above Ukraine and putting it closer to Argentina and Venezuela. Ten- year bonds slid for an eighth day, sending the yield to more than 9 percent.
11.5% yields for a 2-year note are simply beyond sustainability. It was 6.65% only a week ago. At a certain point the government will simply be unable to continue to borrow at these levels.
The trigger for this latest surge in bond yields was a report from Goldman Sachs.
(Bloomberg) -- Greece is likely to cut or delay payments to bond investors even as the country negotiates a bailout package with the European Commission and International Monetary Fund, according to Goldman Sachs Group Inc.
That means "default" in English.
In related news, yields on Portugal's 2-year bond jumped over half a percent after revelations that its budget deficit was 9.4% of GDP, rather than the 8% number previously forecast.