Bond performance augurs well for recovery

THE eurozone debt crisis remains far from resolution.

The agreement reached on a second bailout deal for Greece at the special eurozone heads of state summit meeting in late July is in danger of unravelling. Finland is demanding collateral from Greece in return for its participation in the bailout, while the proposed restructuring of Greek debt is getting a lukewarm reception.

The pressure is back on Greek bonds as a result, with yields hitting record highs last week. Two-year yields hit 44% at one stage, with 10-year yields rising to 18.5%. It is not only Greece that has been in difficulty with the markets. The ECB had to enter the bond market earlier this month to buy Spanish and Italian debt to take the pressure off these markets. Meanwhile, Portugal’s bonds have been treading water, with yields stuck at high levels.