Greek bond yields jump

Greek borrowing costs rose sharply on Wednesday in the face of reports that Greek banks are having trouble raising money on financial markets. The yield, or interest rate, that Greece would have to pay if it issued new 10-year sovereign bonds jumped to 10.373 percent from 9.774 percent on Tuesday in an indication of investor fears for Greek solvency in light of the country's debt and public deficit difficulties.

The rise of the yield reflects a fall in the value of the bonds which have been bought by investors, including savings and pension funds, and banks. The differential with the benchmark 10-year German Bund rose to 7.77 percentage points. At the height of Greece's financial crisis the spread had risen to 8.0 percentage points.

Analysts at Natixis bank said debt financing by Greece and other financially troubled eurozone countries is under pressure from "tensions on the interbank market," where banks borrow among themselves. There have also been reports that the European Central Bank is making huge purchases of Greek debt in a bid to contain the crisis.

Greek banks in effect are unable to secure adequate financing on international markets or from other banks because of the country's debt and deficit burdens. The Greek government, however, has been able to by-pass financial markets to meet its borrowing needs thanks to the provision of loans from the European Union and the International Monetary Fund at below market rates.