Debt figures push Irish yields higher

Ireland's two-year notes extended their decline today, pushing the yield on the securities above 12 per cent amid speculation over possible restructuring among heavily indebted nations.

The yield reached a record 12.076 per cent, before trading at 11.964 per cent at 3.45pm.

Ireland's 10-year yields hit new highs today after the European Union's statistics office said the nation's debt burden surged the most in the euro-area last year. By 3.45pm, the yield was 10.409 per cent, after earlier hitting 10.647 per cent.

According to figures from Eurostate, Ireland had a deficit of 32.4 in terms of percentage of gross domestic product, compared to 10.5 per cent in Greece, 10.4 per cent in the United Kingdom, a 9.2 per cent deficit in Spain and 9.1 per cent in Portugal.

The statistics agency also said Ireland's debt surged by 30.6 percentage points to 96.2 per cent of GDP.Greece had a ratio of government debt to GDP of 142.8 per cent at the end of 2010, Eurostat said.

Greek two-year note yields have climbed almost 800 basis points this month as investors priced in losses, or so-called haircuts, they may incur in the event of a restructuring.

Lars Feld, a member of German chancellor Angela Merkel's council of economic advisers, said Greece cannot avoid restructuring its debts.

"There's more speculation about debt restructuring, which is reflected in the Greek curve," said Christopher Rieger, head of fixed-income strategy at Frankfurt-based Commerzbank AG. "I don't see where any support for Greek debt will be coming from. The prices are still quite a long way away from any reasonable haircut that people will expect if restructuring was announced."

Greece's two-year yields rose to a euro-era record of 23.65 per cent, before paring their advance to 23.41 per cent as of 11.13am. Ten-year yields reached 15.26 per cent, also a record. Portugal's two-year note yields touched a euro- era record of 11.62 per cent, before trimming their gain to 11.53 per cent.

"I don't think that Greece will succeed in this consolidation strategy without any restructuring in the future," Mr Feld told Bloomberg Television in Frankfurt. "I think that Greece should restructure sooner than later."

The yield difference, or spread, between Greek 10-year bonds and German securities of a similar maturity widened to 1,200 basis points, the most since Bloomberg began collecting the data in 1998. The spread has widened 252 basis points this month, even as the Greek government said it has no plans to renegotiate terms with creditors.

The cost of insuring debt sold by Greece and Portugal rose to records, according to traders of credit-default swaps. Contracts on Greece jumped 13 basis points from April 21st to 1,345 basis points, signalling a 66 per cent chance of default within five years, according to CMA. Portuguese swaps climbed six basis points to 666.

The nation's 2010 budget gap was more than a percentage point wider than the government estimated after a revision by Europe's statistics agency, a report today showed. Last year's shortfall was 10.5 per cent of gross domestic product, compared with 15.4 per cent of GDP in 2009, Eurostat said.

In February, the Greek government said it met its revised target for a 9.4 per cent deficit in 2010.

Additional reporting: Bloomberg