Eurozone issues record €110bn in bonds

Eurozone governments have borrowed a record €110bn from the markets so far this year, forcing up borrowing costs for those countries with the weakest public finances as they pay a heavy price for their ballooning debt levels.

Investors warned that the yields, or interest rates, they will demand to lend to Greece and other peripheral economies, such as Portugal, Spain, Ireland and Italy, will continue rising until they are convinced they have put their finances in order.

Theodora Zemek, global head of fixed income at Axa Investment Managers, said: “The problem of sovereign risk is just beginning.

“Countries with high debt levels will have to pay higher and higher yields to issue new bonds.”

Another investor said: “Confidence in high-debt countries has reached such a low point. If there is any sign from politicians that they are not prepared to tackle their debt levels, then there will be a sell-off in eurozone bonds.”

The warning from investors came as the Greek government insisted that they would keep their borrowing programme on track in spite of concerns in financial markets, which saw bond yields hit 10-year highs last week. Senior Greek finance ministry officials, speaking on condition of anonymity, said the country still planned to issue a 10-year bond in the form of a syndicated loan and would also go ahead with a marketing trip to the US and Asia, although no dates had been set.

http://www.ft.com/cms/s/0/4ea2556c-0f62-11df-a450-00144feabdc0.html