Greece, which put the euro zone under pressure recently, had its debt rating downgraded by Standard & Poor’s on April 27th to “Junk”. This downgrade sparked by delays in aid from the IMF and the European Union. Expectations are that even if the bailout took place, it will not solve Greece’s debt issues but only delay an imminent default.
The downgrade had a contagious effect to all other fragile European countries as Portugal’s debt rating was downgraded by two notches and most importantly Spain’s (around 15% of EU GDP).
Bond markets reacted negatively with yields on the 2-year Greek bonds rising from a mere 4.6% a month ago to 25% on Wednesday the 28th. The spreads between the 10-year Greek bond and the German Bunds surged to about 7%.
Global credit markets witnessed some increase in yields as a result of the negative sentiment and the decrease in confidence. Regional credit markets also showed some widening in their spreads after the recent recovery.
The Euro is also under pressure as it decreased relative to the dollar and is currently trading at a 1-year low.
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[...] due to the current credit market turbulence. Economies with loads of debt such as Dubai and Greece, saw a surge in their CDS spreads, as more people are protecting themselves from the possibility of [...]
Greece is one of countries in EU, which caused the debt crisis. Really I think that the country should get high sanctions from the European Commission.
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