Irish Relief Fleeting as `Day of Reckoning' Nears
By Paul Dobson - Nov 26, 2010 10:29 AM ET
Borrowing costs for Europe’s most indebted nations are at record highs as Ireland’s capitulation in accepting a bailout of its banking industry stokes concern that other countries also will have to seek aid.
The average yield for 10-year debt from Greece, Ireland, Portugal, Spain and Italy reached 7.57 percent today, a euro- era record. The average premium investors demand to hold those securities instead of German bunds widened to as much as 492 basis points, the highest level of 2010. The average cost of insuring against default by the five nations using credit- default swaps reached a record 517 basis points on Nov. 23.
“It’s no longer taboo to speak about a restructuring,” said Johannes Jooste, a portfolio strategist at Bank of America Corp.’s Merrill Lynch Global Wealth Management in London, which oversees about $1.4 trillion for clients. “The fact that bond yields continue to rise and put pressure on countries that have to fund from the market makes investors less and less confident, and it’s bringing forward the day of reckoning.”