Greek/German govt bond spread hits 11-month high

Wed Jan 20, 2010 7:13am EST

 LONDON, Jan 20 (Reuters) - The premium investors demand to
hold Greek government bonds rather than euro zone benchmark
German Bunds rose to a fresh 11-month high on Wednesday on the
prospect of new Greek debt supply.
 Worries about Greece also weighed on other peripheral euro
zone government bonds, causing their spreads to widen versus
Bunds.
 Greece Finance Minister George Papaconstantinou said on
Wednesday the government was looking at all means of borrowing
in 2010 and said there was no decision on a private placement of
bonds this month, keeping alive the prospect of an imminent
issue.
 The Greek 10-year government bond GR10YT=RR yielded 298
basis points over the equivalent German Bund, up from 265 bps
late on Tuesday and nearing the euro lifetime highs just above
300 basis points set in February 2009 during the height of the
global financial crisis.
 "The market seems convinced there is Greek supply about to
hit the screens at some point. The spread is moving very quickly
on no volume," said a bond trader in London.
 The equivalent Spanish spread ES10YT=RR widened 7 basis
points to 81 basis points, the highest since mid-July.
 The iTraxx SovX Western European index widened on Wednesday,
reaching 79.5 basis points, equivalent to last week's highs,
according to market sources, driven by moves in underlying
Greek, Spanish and Potuguese credit default swaps.
 (Reporting by Ian Chua and Kirsten Donovan)