LONDON, Jan 20 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)