The Greek government on Friday outlined plans aimed at avoiding a restructuring of its debt, but said detailed measures would only be revealed after Easter.
The market has become convinced Greece will be forced into a de facto default by extending the maturity of its debt in a bid to improve its ability to pay back the billions of euros it owes.
Earlier this month, the likelihood of a Greek restructuring increased on reports the International Monetary Fund was considering such a plan, and despite denials from a number of officials in Athens and across Europe, Greek bond yields have been rising fast, culminating in major moves in both the 2- and 5- year yields on Thursday.
The topping point for this market move appears to have been comments made by the German Finance Minister Wolfgang Schaeuble in German publication Die Welt.
"I'm expecting a detailed analysis on the debt sustainability of Greece. If this report concludes that there are doubts about the debt sustainability of Greece, something must be done about it," he told the magazine.
A Dow Jones report on Thursday pointed to the chance that all Greek debt, some 340 billion euros worth, could be restructured so that it would be paid back over 30 years, significantly improving its ability to make payments but locking in investors who bought the debt on far shorter timeframes.
The market is likely to view promises out of Athens with a pinch of salt.
“Greece continues to hold out against the pressure for a swift announcement. Its reasons for doing so seem simple enough,” said Simon Derrick, the head of currency research at Bank of New York Mellon in London in a research note.
“Having been effectively pushed towards asking for a bailout last year and having seen vocal campaigns being successfully launched to push both Ireland and Portugal to accept similar packages in order to minimize contagion within the euro zone, it may well feel that it is being sacrificed simply to protect political interests elsewhere in Europe as well as minimize contagion risks,” he said.
Given a restructuring would hurt bondholders, mainly European banks, this outcome would probably be easier to sell to voters in Germany, France or even Finland, which goes to the polls this weekend.
“It is difficult for investors not to come away from the last few weeks without a distinct feeling of déjà vu,” said Derrick.
“Having seen pressure being brought to bear upon Irelandand Portugal to accept early bailouts to contain contagion effects, it feels that similar forces are emerging now for Greece to make a swift move to announce a restructuring despite the fact that it has no intention of going back to the market for fresh funds until next year,” he said.
“All this indicates to us that the pressure on Greece to announce something will intensify over the next few days as politicians and officials try and minimize the spillover effects from the collapse in Greek markets on other markets in the euro zone,” said Derrick.