Bulgaria, Serbia Are ‘Vulnerable’ to Greek Crisis, Yields Soar

[Joanne98]

Feb. 5 (Bloomberg) -- The cost to protect Bulgarian debt from default rose to a five-month high and Serbia yields jumped the most since July as analysts said the economies are among the most vulnerable to lower investment because of Greece’s crisis.

Credit-default swaps on Bulgaria’s debt climbed 13 basis points to 270, the highest level since Aug. 21, according to CMA Datavision prices. The extra yield investors demand to own Serbian foreign-currency bonds over U.S. Treasuries rose 23 basis points, the most since July 14, to 4.06 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index.

Greek lenders, whose subsidiaries account for about 30 percent of the banking system in Bulgaria and 15 percent in Serbia, may pull money from the countries if they face “liquidity shortages” because of Greece’s struggle to finance its budget deficit, Timothy Ash, a strategist at Royal Bank of Scotland Group Plc, said in an e-mailed note today. Serbia and Bulgaria may be “vulnerable” to a decline in investment from Greek companies, wrote UniCredit SpA economist Matteo Ferrazzi.

“With Greece being caught in the headlights at the moment, market attention inevitably turns to contagion risk across the region,” wrote Ash, the London-based head of emerging-markets research at RBS.
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