Greek debt fears ease after EU aid request

By Aaron Smith, CNNMoney.com staff writer


NEW YORK (CNNMoney.com) -- Greek bonds backed off their record-high yields on Friday after the prime minister formally requested about $53 billion in financial aid from the European Union and the International Monetary Fund.

Prime Minister George Papandreou, in a letter to the European Central Bank, asked for an emergency aid package for his debt-stricken country. European finance leaders have pledged that Greece could receive nearly $40 billion at a 5% interest rate. The IMF is prepared to lend Greece more than $13 billion.

"We are prepared to move expeditiously on this request," said IMF director Dominique Strauss-Kahn, in a press release.

While investors were still plenty worried about Greece, fears eased somewhat Friday. The 10-year Greek note yielded 8.03%, a whopping 4.95 percentage points above Germany's benchmark 10-year bund. But that was down from Thursday's record-high yield of 8.8%, 5.75 percentage points above the bund.

"This will allow some breathing space for the Greek authorities to tackle their awful fiscal position as liquidity worries ease, at least for the time being," said Nick Stamenkovic, fixed income strategist at RIA Capital Markets in Edinburgh, Scotland.

Papandreou's request came a day after Eurostat, the EU's statistical authority, said Greece's 2009 budget deficit was almost $43 billion. The deficit is equal to 13.6% of the country's gross domestic product, trumping the claims of Greek officials that it was 12.7%.

The request also followed a downgrade from the credit agency Moody's, which cut the country's rating by one notch to A3, citing "significant risk."

Thursday's developments sent Athens into turmoil, with protests and worker strikes. European leaders worry that the Greek chaos through could rattle the rest of the continent.

"The market confidence had collapsed and we were at a point of market capitulation," said Stamenkovic. "The Greek government was forced into a corner by the markets."

RIA credit strategist Harald Eggerstedt said Greece could use the aid to help refinance its debt on May 19, when more than $10 billion worth of bonds are set to mature.

Though total chaos has now been averted, Stamenkovic said the Greek bond market is likely to remain volatile for some time, as Greece goes through the "long and painful process" of getting its fiscal house in order.

"The markets are still very nervous about the medium-term fiscal outlook," he said.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.99%4.00%
15 yr fixed3.06%3.10%
5/1 ARM3.20%3.19%
30 yr refi3.99%4.08%
15 yr refi3.07%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,828.24 0.49 0.00%
Nasdaq 4,791.63 4.31 0.09%
S&P 500 2,067.56 -5.27 -0.25%
Treasuries 2.19 -0.04 -1.79%
Data as of 1:36pm ET
Company Price Change % Change
Kinder Morgan Inc 41.35 -0.97 -2.29%
Halliburton Co 42.20 -5.14 -10.86%
General Electric Co 26.49 -0.38 -1.41%
Bank of America Corp... 17.04 -0.07 -0.41%
Apple Inc 118.93 -0.07 -0.06%
Data as of 1:02pm ET

Sections

OPEC wants to squeeze U.S. shale oil producers by forcing prices even lower. It's a move even Tony Soprano would be proud of. More

Colorado's marijuana stores are following the lead of other retailers and offering big deals on pot. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.