Instant view: Greek spreads hit record high, doubt weighs

ATHENS (Reuters) - Greek assets took a beating on Tuesday following a number of newspaper reports casting doubt on Greece's ability to make it through an April-May redemption period without turning to an EU-IMF safety net.

The premium investors demand to hold 10-year Greek government bonds rather than euro zone benchmark German Bunds rose to 408 basis points, the highest level since Greece joined the euro zone in 2001.

Following are analysts' comments:

JONATHAN LOYNES, CHIEF EUROPEAN ECONOMIST, CAPITAL ECONOMICS

"Today's 60bps surge in Greek government bond yields underlines yet again the continued precariousness of the troubled economy's position.

"The blow-out was apparently triggered by rumors -- since denied -- that Greece is seeking to renegotiate the planned rescue package involving both EU and IMF loans announced about 10 days ago. But yields had been creeping higher again over the last week anyway, suggesting that markets were far from convinced that the package spelt an end to Greece's troubles."

"With something close to 20 billion euros of debt needing to be refinanced by the end of May, the latest rise in yields is a major blow to hopes that Greece might yet manage to muddle through on its own. Needless to say, none of this is good news for the euro either."

CHRIS PRYCE, DIRECTOR, FITCH RATINGS

"It shows how volatile the market is and how fragile the Greek financial position is."

"Our position is unchanged -- the rating is still BBB+, the outlook is still negative. We think that what is in place at the moment, the IMF EU offer, is sufficient to see the Greek government through its financing in April and May but obviously they will have to pay a stiff price in terms of interest rates, at least 6 percent."

"I don't think it's possible to say the worst of the crisis is over. It is possible to say that with the EU deal there is a partial alternative for the Greek government but it's not that satisfactory for their point of view. Worries for next year are still there.

"We're not back in the stage when there was great doubt if the EU would help - and we think Greece could borrow 10 billion from the IMF."

JENS UWE NIKLASCH, BOND ANALYST, LBBW:

"This situation is not sustainable."

"There are two options: either Greece convinces markets and refinances its maturing debt in April and May, or spreads remain at the current level and even widen further, and the country will have to seek EU support."

"Confidence that Greece will return to solid finances under its own steam has weakened since the EU summit. What is missing are tangible signs that Greece can implement the fiscal measures it has announced."

"The refinancing of maturing debt in April and May will be decisive. There must be no ambiguities and lack of clarity before that."

"If Greece has no sufficient liquidity shortly before the April bond issue, I believe the emergency mechanism will kick in."

GIADA GIANI, ECONOMIST, CITIGROUP

"Markets are pushing to the limit to see where the threshold for the activation of the emergency plan is."

"Bondholders are worried about next month's bond redemptions. They are worried about not getting their money back."

"There is a huge amount of uncertainty over the terms of the safety net: First about the terms of the IMF involvement, about how much money the IMF would be willing to lend, on what conditions and at what interest rate. This scares markets because they think that IMF involvement may entail debt restructuring."

"The other source of uncertainty is the extent to which EU funds will be available and on what terms, and how quickly they can be made available."

"I don't think there is anything that Greece can do at this stage to convince markets. Everything they had to do, they have already done it. One can't push them harder on fiscal tightening at this stage."

KOON CHOW, STRATEGIST, BARCLAY'S CAPITAL

"The pressure is back on, but then again we and most investors did not think it would dissipate."

"They have to get through the April-May redemption period... They have to get through it without having to look for multilateral funding, and that's looking increasingly unlikely."

"The real test is when they try to sell the dollar bond. So far the recent tests have fared badly."

"The message has been that if they can't finance themselves, then there is an IMF and EU program. And the market is testing that."

DIEGO ISCARO, ECONOMIST, IHS GLOBAL INSIGHT

"The crisis is far from over."

"This is a long-term problem; the crisis is not over because the economy is still contracting. The structural reforms will still need to be implemented; the political situation is still uncertain."

"The higher the interest rates they have to pay on debt are, the more difficult fiscal consolidation will be."

"This shows that, despite the euro zone safety net unveiled in late March, there are still significant concerns about the situation of the Greek economy."

"The potential bailout deals with short-term liquidity problems, but the economy will still have to go through a very lengthy and difficult adjustment period in order to improve its competitiveness."

"Moreover, the euro zone program didn't deal with the problem of the very high interest rates the government is currently paying."

"Additionally, the not-very-successful bond auction carried out last week may have helped to worsen markets' sentiment toward Greek debt and drive spreads upwards."

JUSTIN KNIGHT, STRATEGIST, UBS

"The market reaction is surprising. Most investors are tired of this crisis, the uncertainty over the Greek situation which affects the clarity of decisions on their bond portfolios. But the crisis will be sorted out one way or the or the other."

"Overall, the general picture is that the aid plan is not as solid as it was first perceived by investors."

"There is a variety of questions asked by the market including whether the IMF would request a restructuring of Greek debt and at what level spreads would trigger the activation of the aid mechanism."

"At 400 plus basis points, Greek bonds offer a pretty nice risk premium but you have to be able to take the volatility."

(Reporting by George Georgiopoulos, Renee Maltezou; compiled by Michael Winfrey)