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A protester holds up a Greek flag during an anti-austerity demonstration in front of the parliament in Athens Feb. 22, 2012. (YANNIS BEHRAKIS/YANNIS BEHRAKIS/REUTERS)
A protester holds up a Greek flag during an anti-austerity demonstration in front of the parliament in Athens Feb. 22, 2012. (YANNIS BEHRAKIS/YANNIS BEHRAKIS/REUTERS)

What the bond market says Add to ...

Greece may be living on borrowed time as a member of the euro zone now that anti-austerity forces are poised to take control of the parliament. Indeed, many investors are expecting that the country will default on its debt in the next few months.

We have seen these concerns before. However, this time the fear seems to be largely in check. The bond market is telling us that contagion is not a factor right now.

While the yield on 10-year Greek government bonds has jumped 39 basis points today, to an eye-popping 22.25 per cent, most other countries’ borrowing rates are stable.

The yield on French 10-year notes edged up seven basis points to 2.795. But German, Dutch, Swiss, Norwegian, Danish, Belgian, Austrian and Finnish rates all declined.

Among the most problematic economies, Italy’s 10-year note rose six basis points, to 5.427, Spain’s increased by 10 basis points to 5.791 and Ireland’s lifted three basis points to 6.640.

For some context, the Spanish yield had topped 7 per cent last November, as Italy’s 10-year yield touched 7.5 per cent.

Portugal is widely considered to be in the most dire straits next to Greece. The yield on the government’s 10-year bonds jumped 25 basis points today, to 10.72, which is a long way below levels reached late in 2011 and early this year, when the yield exceeded 16 per cent.

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