Greek 10-year bond yields and credit-default swaps surged to a record as borrowing costs increased at a debt sale and before European leaders begin meetings to contain the sovereign debt crisis. Spanish bonds also slid as the government began selling debt through banks. Greek bond losses extended declines to a ninth day after Greece’s credit rating was cut by Moody’s Investors Service yesterday. Portuguese 10-year bonds fell for a second day before a notes auction tomorrow. German 10-year bonds weakened as a report showed factory orders in Europe’s biggest economy grew more than economists estimated in January. “The biggest driver of peripheral bonds this week is undoubtedly the peripheral supply that’s coming to the market,” said Peter Chatwell, a strategist at Credit Agricole Corporate & Investment Bank in London. “Every time more supply comes to market, the market cheapens up a bit.” The yield on 10-year Greek bonds jumped as much as 48 basis points to 12.82 percent, the most since Bloomberg began collecting the data in 1988. The yield was at 12.67 percent as of 12:41 p.m. in London. The 6.25 percent securities maturing in June 2020 fell 1.84, or 18.4 euros per 1,000-euro ($1,390) face amount, to 65.48. The extra yield investors demand to hold the securities instead of German bunds widened to as much 953 basis points, the most since Jan. 10. Credit-default swaps insuring Greek government bonds rose 5 basis points to an all-time high 1,037 basis points, meaning it costs $1.04 million annually to insure $10 million of debt for five years. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Garth Theunissen in London gtheunissen@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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