Spain has never been so close to default and Greece, Ireland and Portugal may need further bailouts, Citigroup Inc. chief economist Willem Buiter said.
“Spain is the key country about which I’m most worried,” Buiter, a former Bank of England policy maker, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It’s really moved to the wrong side of the spectrum and is now at greater risk of sovereign restructuring than ever before.”
Two years of debt-driven stresses in European markets have eased as Greece avoided a disorderly default, the building blocks of a new euro economic management system fell into place and the European Central Bank pumped over 1 trillion euros ($1.3 trillion) into the banking system.
[Keep reading: Spain’s Default Risk Is Rising, Buiter Says: Tom Keene – Bloomberg.]
Mish thinks Willem Buiter is not going far enough, and the chance for a Spanish Debt restructuring is in the 90% range. ~ Ilene
Spain Faces "Increasing Risk of Debt Restructuring" Says Citigroup Chief Economist
Spanish Sovereign debt yields jumped again today following Restructuring Concerns expressed by Willem Buiter.
Spanish bonds fell, pushing 10-year yields to the highest level in a month, after Citigroup Inc. chief economist Willem Buiter said the nation faced an increasing risk of a debt restructuring.
Ten-year Spanish securities slid for an eighth day, widening the extra yield over similar-maturity German bunds, as a decline in European stocks sapped demand for higher-yielding assets.
“Spanish spreads moved much wider after Buiter’s comments,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. “This highlights concern over further debt restructuring. Bunds recovered on the resulting safe-haven demand.”
The Spanish 10-year yield jumped 14 basis points, or 0.14 percentage point, to 5.37 percent at 2:55 p.m. London time after rising to 5.38 percent, the highest since Feb. 16.
Dutch Bonds
The extra yield investors demand to hold Dutch bonds instead of German bunds widened after an independent agency said the Netherland’s budget deficit may increase.
The Netherlands Bureau for Economic Policy Analysis said the shortfall would exceed the European Union’s target of 3 percent. The agency said the 2013 deficit would be 4.6 percent, revised from 4.5 percent.
Spanish 10-Year Bond Yield
Willem Buiter is a bit too politically correct. I suggest the odds of a Spanish Debt restructuring is greater than 90%.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
