Greece's government debt is back in the spotlight, and investorsare looking for the exit.

As the four-day rout in Greek bonds sent yields to the highestsince January, the selloff started to infect nations from Irelandto Portugal and even larger countries such as France. In Spain, adebt auction fell short of the government's maximum target, andEuropean stocks extended their longest losing streak since 2003.Only German bunds were sheltered from the slump, with demand forthe safest assets pushing their yields to a record low.

“We are in a typical flight-to-quality environment with substantial losses in stockmarkets and wider spreads,” said Patrick Jacq, a fixed-incomestrategist at BNP Paribas SA in Paris. “The Spanish auctionsuffered from the environment, not from domestic reasons. It's themarket environment which is not favorable.”

Greece's 10-year yield jumped 109 basis points, or 1.09percentage point, to 8.94 percent at 12:46 p.m. London time, thebiggest increase since July 2012. The rate touched 8.995 percent,the highest since Jan. 30. The 2 percent bond due in February 2024declined 5.46, or 54.60 euros per 1,000-euro ($1,276) face amount,to 65.325.

Germany's 10-year yield fell one basis point to 0.75 percent andreached 0.715 percent, the lowest since Bloomberg startedcollecting the data in 1989.

Spain sold a combined 3.2 billion euros of bonds due in October2024 and October 2028, versus a target of as much as 3.5 billioneuros. The Madrid-based Treasury allotted 2.2 billion euros of the10-year securities at an average yield of 2.196 percent. Thatcompares with a record-low auction yield of 2.075 percent at aprevious sale on Oct. 2.

Spain's 10-year yield climbed 14 basis points to 2.15 percent,the biggest daily increase since May 15. The rate on equivalentItalian bonds jumped 19 basis points to 2.62 percent and touched2.74 percent, the highest level since Aug. 13.

Even France, whose 10-year yields dropped to a record-low 1.112percent yesterday, was not immune to the selloff. The rate onFrench bonds due in November 2024 increased 10 basis points to 1.23percent.

Greek Reforms

It's five years since a change in government in Greece set inmotion the debt crisis by unveiling a budget deficit that waslarger than previously reported by its predecessor. The country waseventually granted a 240 billion-euro lifeline that has kept itafloat since 2010.

Greece's 10-year yield climbed to a record 44.21 percent inMarch 2012.

Markets slid this week after euro-area finance ministers clashedwith the nation's leaders over their plan to leave their safetynet, sparking concern that Greece won't be able to finance itselfat sustainable rates without the support of its regional partners.The lack of supervision may lead to the country backtracking onreforms agreed with the European Union and the InternationalMonetary Fund.

“Whether that's a bellwether for more problems to come or not,I'm doubtful of, but we certainly saw the periphery sell off,”Andrew Wilson, Goldman Sachs Asset Management's chief executiveofficer for Europe, the Middle East and Africa, said in aninterview with Bloomberg Television's “On The Move” with JonathanFerro, referring to the slump in Greek bonds yesterday. “It was aflight to quality, it was a bit of a scary story for a while there,and I think that's all it's reflecting.”

Greek bonds have lost 17 percent in the past month, cuttingtheir return this year through yesterday to 9.9 percent, BloombergWorld Bond Indexes show.

Trading of Greek government debt through the electronicsecondary securities market, or HDAT, was 199 million eurosyesterday, the highest since Sept. 24, ANA reported. Monthlytrading volumes plunged to zero in October 2011 from a peak of 136billion euros in September 2004.

The Stoxx Europe 600 Index of shares, which has retreated 7.9percent since Oct. 6 when the IMF cut its global-growth forecasts,dropped for a ninth day and reached the lowest level sinceSeptember 2013. U.S. stock index futures and Asian shares alsofell.

German bunds advanced as a European Union report confirmed thateuro-area consumer prices rose at the slowest pace in five yearslast month, adding to evidence that the economic outlook hasdarkened and increasing pressure on the European Central Bank toexpand stimulus. U.S. Treasuries also gained, pushing 10-yearyields below 2 percent.

Volatility on Irish bonds was the highest in the euro areatoday, followed by those of Portugal and Greece, according tomeasures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.

Ireland's 10-year yield increased 23 basis points to 1.93percent and the rate on equivalent Portuguese bonds jumped 42 basispoints to 3.70 percent.

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