GREECE'S debt was downgraded by Standard & Poor's to “junk” status on Tuesday April 27th, driven in part by fears about delays in aid for Greece from the European Union and the IMF. The agency also cut Portugal's debt rating by two notches. The moves provided another jolt to euro-area bond markets and added to worries that a bail-out for Greece, even if it came soon, would only delay a default. Contagion has already hit other troubled European economies. Yields on two-year Greek notes rose above 25% on Wednesday, from 4.6% a month ago. Spreads between ten-year Greek bonds and benchmark German bunds the day before spiked to nearly seven percentage points. Spreads also rose substantially for bonds issued by Portugal and Ireland, but only slightly for Italian and Spanish government debt.

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