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. 
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