LONDON (Reuters) – The risks of the U.S. losing its prized triple-A rating over the medium term have increased as the country faces a political impasse and nears its debt ceiling, Standard and Poor’s said on Tuesday.

While the ability to adapt both fiscal and monetary policy was a positive for the United States, the risk of a credit rating downgrade had increased due to a lack of political consensus on how to employ that flexibility, Moritz Kraemer, head of sovereign credit ratings for Europe at Standard & Poor’s, said on Tuesday.

“The problem is this flexibility needs to be employed and for that you need political consensus. That’s not very visible right now,” he said.

The United States is expected to exhaust its ability to meet financial obligations by August 2, but the Treasury department has said that date could shift.

“The downside risks in the medium term have increased and we did assign a negative outlook that signifies there’s a one in three chance the rating might go down in the next few years,” Kraemer told a Euromoney bond conference in London.

Standard & Poor’s threatened in April to downgrade the United States’ AAA credit rating unless the Obama administration and Congress find a way to slash the yawning federal budget deficit within two years.

Earlier on Tuesday, Fitch ratings said it saw risks of a debt default in the United States, whose top-rated bonds may suffer if the country doesn’t lift its fiscal borrowing ceiling.

LONDON, June 20 (Reuters) – Greek and other lower-rated euro zone debt came under renewed pressure on Monday after ministers delayed granting emergency loans to Greece and rating agency Moody’s warned Italy’s credit rating could be cut.

Bund futures FGBLc1 were last up 28 ticks at 126.35 as risk averse investors took shelter in triple-A German debt.

Sunday’s meeting of Eurogroup finance ministers had been expected to agree to provide Greece the funding it needs to avoid a near-term default, but ministers postponed a final decision pending confirmation that Athens could muster political approval for further austerity measures. [ID:nLDE75I0FM]

“My worry is really that the market is running out of patience … I’m fearful that if they don’t reach an agreement and make a compromise that there could be more pain to come across all asset classes,” a strategist at a London bank said.

Ten-year Greek bond yields GR10YT=TWEB rose to 17.82 percent, raising the risk premium on holding Greece’s debt rather than benchmark German Bunds to 1,489 basis points. The premium hit its euro-era high of 1,600 bps late last week.

“Spreads will continue to widen until we have the release of the last tranche because it’s really getting close to going to a default. Between July and August they really need the money,” said ING rate strategist Alessandro Giansanti.

The spreading impact of the region’s debt crisis was evident in Moody’s decision to place Italy’s Aa2 rating on review for downgrade late on Friday. Moody’s cited concerns over an increased cost of borrowing stemming from the Greek crisis, as well as structural impediments to growth. [ID:nN17266057]

LONDON, June 20 (Reuters) – Greek and other lower-rated euro zone debt came under renewed pressure on Monday after ministers delayed granting emergency loans to Greece and rating agency Moody’s warned Italy’s credit rating could be cut.

Bund futures rose as risk averse investors sought shelter in triple-A rated German debt with the September contract FGBLc1 last up 48 ticks at 126.55.

Sunday’s meeting of Eurogroup finance ministers had been expected to agree to provide Greece the funding it needs to avoid a near-term default, but ministers postponed a final decision pending confirmation that Athens could muster political approval for tough new austerity measures. [ID:nLDE75I0FM]

Ten-year Greek bond yields GR10YT=TWEB rose to 17.66 percent, raising the risk premium on holding Greece’s debt rather than benchmark German Bunds to 1,474 basis points. The premium hit its euro-era high of 1,600 bps late last week.

“Spreads will continue to widen until we have the release of the last tranche because it’s really getting close to going to a default. Between July and August they really need the money,” said ING rate strategist Alessandro Giansanti.

Greek Prime Minister George Papandreou has called a confidence vote for Tuesday in a bid to push through deficit-busting reforms.

The spreading impact of the region’s debt crisis was evident in Moody’s decision to place Italy’s Aa2 rating on review for downgrade late on Friday. Moody’s cited concerns over an increased cost of borrowing stemming from the Greek crisis, as well as structural impediments to growth. [ID:nN17266057]

LONDON (Reuters) – Greece faces ever greater difficulties convincing markets it can avoid defaulting on its debt, an event that would have far-reaching consequences for global financial markets.

European officials are under severe pressure to avert such an outcome by agreeing a deal to ease Greece’s immediate funding shortage and put its finances on a sustainable path.

Despite the urgency, no agreement has been reached. A deal has been delayed as policymakers try to balance the need to avoid triggering financial turmoil against political pressure to make bondholders share the burden of supporting Greece.

Below are the main possible solutions to the Greek debt crisis and the potential impacts on private bondholders, credit ratings and derivative markets.

DEBT ROLLOVER

Officials have put forward the idea of a debt rollover modelled on the “Vienna Initiative” used in 2009 to boost credit for central European economies in exchange for an agreement to roll over existing debt holdings as they mature.

This option has emerged as the most widely backed, championed by the European Central Bank and France, and more recently gaining support from euro zone paymaster Germany.

LONDON (Reuters) – Greece faces ever greater difficulties convincing markets it can avoid defaulting on its debt, an event that would have far-reaching consequences for global financial markets.

European officials are under severe pressure to avert such an outcome by agreeing a deal to ease Greece’s immediate funding shortage and put its finances on a sustainable path.

Despite the urgency, no agreement has been reached. A deal has been delayed as policymakers try to balance the need to avoid triggering financial turmoil against political pressure to make bondholders share the burden of supporting Greece.

Below are the main possible solutions to the Greek debt crisis and the potential impacts on private bondholders, credit ratings and derivative markets.

DEBT ROLLOVER

Officials have put forward the idea of a debt rollover modelled on the “Vienna Initiative” used in 2009 to boost credit for central European economies in exchange for an agreement to roll over existing debt holdings as they mature.

This option has emerged as the most widely backed, championed by the European Central Bank and France, and more recently gaining support from euro zone paymaster Germany.

LONDON, June 16 (Reuters) – Greek bond prices sank to record lows on Thursday as uncertainty escalated over how and when policymakers will seal a deal to meet Greece’s immediate funding needs and set the country’s finances on a sustainable path.

Greece’s position looks increasingly unstable as the European Union and International Monetary Fund look for a fresh commitment to implement budget cuts, just as internal Greek political and public support looks stretched to breaking point. [ID:nLDE75F0TU]

“The disunity within the EU corridors of power, as well as the political and social upheaval in Greece, has shaken the markets,” said CDS monitor Markit analyst Gavan Nolan.

The value of Greek 10-year bonds GR10YT=TWEB fell to its lowest since at least the launch of the euro at around 50 percent of their face value.

The cost of insuring against a Greek default spiralled by 174 basis points to 1,900 bps, making it the most expensive sovereign debt to insure in the world, according to data monitor Markit.

The turmoil sent the euro tumbling to a record low versus the safe-haven Swiss franc and intensified pressure on the region’s other lower-rated states, highlighted by weakening demand at a Spanish bond auction. [ID:nLDE75F0U9] [FRX/]

“They had to concede quite a substantial amount to investors in order to get them to buy,” said WestLB rate strategist Michael Leister.

LONDON (Reuters) – An increase in the amount of EFSF bailout bonds to fund fresh bailouts would be met by ample investor demand said the rescue fund’s CFO on Wednesday, adding that its most recent sale saw improved participation from Asia.

The European Financial Stability Facility was set up in May 2010 to raise cash for Portuguese and Irish bailout packages as part of a wider safety net.

The facility raised 5 billion euros (4.38 billion pounds) with a syndicated sale of 10-year bonds on Wednesday, receiving orders in excess of 8 billion euros. Demand from Asian investors rose to 45 percent, up from 36 percent at the launch of a separate bond in January.

“We see that we address ourselves to very strong and very supportive investors and they are always there,” said Christophe Frankel, chief financial officer of the EFSF, when asked if any additional bond issues would be met with sufficient demand.

With Greece hoping to seal a fresh bailout deal next week, it is unclear whether any new loans would be funded via the EFSF mechanism.

Greece’s original aid package consisted of bilateral loans from the International Monetary Fund and euro zone partners.

FLEXIBLE ISSUING

LONDON, June 15 (Reuters) – Edgy investors ditched lower-rated euro zone government debt on Wednesday, sending Greek bond yields soaring to new highs after officials showed little sign of progress on a new deal to tackle Greece’s crisis. Differences of opinion between policymakers on how to involve private holders of Greece’s debt in a new bailout package have heightened uncertainty in financial markets, pushing Greek, Irish and Portuguese bond yields to euro-lifetime highs.

“Hopes get dashed more and more that we won’t get a waterproof solution by the end of next week,” said Commerzbank rate strategist David Schnautz.

“This is placing another big layer of uncertainty over everything and it sounds like you don’t want to be that much invested in the periphery at the moment,”

Ten-year Greek bond yields GR10YT=TWEB rose above 18 percent for the first time since the launch of the euro — a yield around 15 percentage points higher than that on the region’s benchmark German Bund.

Equivalent Portuguese and Irish spreads versus Bunds also widened to euro era record levels and credit default swap monitor Markit said the cost of insuring debt from all three bailed-out countries had hit new highs. [ID:nLDE75E0V7]

Greek bank shares fell by 4 percent and the Thomson Reuters Peripheral Banking Index was down 3.23 percent, sharply underperforming the European FTSEurofirst 300 index .FTEU3.

The latest rise in already sky-high peripheral bond yields came after an informal meeting of euro zone finance ministers reached no consensus on how to structure a fresh aid package for Greece.

LONDON, June 15 (Reuters) – Safe-haven buying lifted German Bunds on Wednesday after euro zone ministers offered little sign of progress on a new deal to tackle Greece’s debt crisis, keeping the pressure squarely on the region’s lower-rated bonds.

Differences of opinion between policymakers on how to involve private holders of Greece’s debt in a new bailout package have generated uncertainty in financial markets, pushing Greek, Irish and Portuguese bond yields to euro-lifetime highs.

“It looks like widespread disagreement, with some fairly hard lines being taken by people,” a trader said.

“Markets don’t like uncertainty so I can’t see why it’s not going to hit the periphery… Shut your eyes and buy Bunds.”

Ten-year Greek bond yields were 13 basis points high on the day at 17.73 percent, within a few basis points of intraday highs seen on Tuesday.

Bund futures FGBLc1 rose by as much as 35 ticks to 125.76, building on gains seen late on Tuesday evening when details of Tuesday’s informal meeting of euro zone finance ministers began to emerge.

Technical charts, however showed mixed signals over how much further Bunds had to rally, prompting Commerzbank to recommend a neutral exposure for the day’s session. The contract was last 13 ticks higher on the day at 125.54.

LONDON, June 9 (Reuters) – Greek bond yields soared and the cost of insuring the country’s debt hit a record high on Thursday after worsening GDP data highlighted its chronic economic problems.

Benchmark German debt prices showed little reaction after the European Central Bank kept interest rates on hold, as forecast, with markets expecting the ECB to signal a July rate hike in a news conference due at 1230 GMT.

The 10-year Greek yield GR10YT=TWEB climbed 61.8 basis points to 16.72 percent, extending an early rise after first quarter GDP data pointed to a worse than previously thought recession in the heavily indebted euro zone state.

“The problem is not only that Greece won’t return to (debt) markets but the deeper the recession, the harder it is for Greece to reach their deficit goals for this year, said Birgit Figge, strategist at DZ Bank.

Two-year Greek bond yields soared by 145 bps to 25.72 percent, nearing the euro lifetime high of around 27 percent.

The EU, ECB and IMF mission to Greece said in a report obtained by Reuters on Wednesday that the next disbursement of Greek aid could not take place until it corrected the under-financing in its adjustment programme. [ID:nB4E7GU02C]

“It doesn’t read very well at all… I can’t see anything supportive in there for Greece,” a trader said.