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What Impact Will Greek Troubles Have on Corporate Bonds?

Corporate credit spreads may widen out a bit in the near term, but Greece's troubles should not lead to a systemic financial crisis, says Morningstar's Dave Sekera.

Dave Sekera: The four-year-running Greek debt tragedy is rapidly nearing its end.  The negotiations to refinance Greece's bailout financing have broken down, and Greece's prime minister has called for a national referendum. The intent of this referendum is to ask voters whether the country should accept the EU's conditions to extend further financing. As a result, Greece was unable to meet its debt payment due at the end of June, and the ECB will not increase the size of its emergency lending-assistance program. As a result, Greece has shut down its banking system for six days until July 6.

While this will certainly negatively impact Greek citizens and cast a shadow over Europe's struggle to stimulate stronger economic growth in the eurozone, we do not think a Greek default and possible exit from the eurozone will significantly impact credit spreads in the corporate bond markets.