EU Debt Crisis: Pimco to Shun Greek Bonds; Will Others Follow? - CNBC

EU Debt Crisis: Pimco to Shun Greek Bonds; Will Others Follow? - CNBC

Pimco's Mohamed El-Erian says the world's biggest bond fund will not take up the latest Greek bond auction despite the new rescue package from the European Union. The CEO of Pimco believes the terms of the package fail to tackle the euro zone member's long term finances and solvency.

The news is likely to come as a major blow to the government in Athens which will try and raise 1.2 billion euros ($1.6 billion) in 6-month and 1-year treasury bills on Tuesday and has to raise 11 billion euros by the end of May.

Pimco's decision is also likely to affect the Greek government's debt issuance plans ahead of a US road show later this month, Simon Derrick from Bank of New York Mellon told CNBC's Squawk Box Europe.

Greece plans to raise between $5 billion and $10 billion in dollar-denominated bonds, and a road show was planned for the last week of April.

But Pimco would have been one of the road show's major targets and could make others consider whether to buy into any offering in the US market and beyond, Derrick said.

The market is clearly not convinced by the terms of the rescue package, said Andy Brough, a hedge fund manager from Schroders.

Brough pointed to the yield of the 10-year Greek bond, which continues to trade significantly higher than the 5 percent offered under the terms of the EU/IMF package.

The spread between Greek and German bonds fell sharply and stocks in Athens rallied Monday, after the EU agreed on details for an aid package for Greece.