LONDON Investors in cash-strapped Greece appear to be losing faith in a pledge from European officials five years ago that the country's default would be a one-off.
It was partly the strength of that promise that allowed Greece to make one of the fastest returns to markets of any defaulted sovereign, taking money from private investors in 2014 just two years after it had imposed hefty writedowns.
The rationale for those who bought the bonds was simple: public creditors, which have lent Athens hundreds of billions of euros, but were spared in the 2012 restructuring, would have to take the next hit.
Yet just months before the first instalment of the new debt falls due on July 17, a three-way quarrel between Greece, the EU and the International Monetary Fund, has triggered a fall in prices that suggests that logic might be flawed.
The main concern for investors is that if a review of Greece's bailout programme is not concluded by early July, Athens will not receive the money it needs to repay around 8 billion euros of debt mainly due to the European Central Bank but also around 2 billion euros owed to them that month.
Lutz Roehmeyer, a portfolio manager at LBB-INVEST in Germany who owns around 3 million euros of the bond, said there was a "little bit of doubt" that Greece could pay its debts and that "an accident" could happen. Overall, though, he was still expecting to be paid.
"If it is coming to a default by accident then the ECB would suffer and from my point of view you want to avoid losses at the ECB level," Roehmeyer said.
"It is one thing to have a bad headline about giving Greece money again, but even worse if you communicate that now losses have been incurred by the ECB."
Carmignac Gestion, Loomis, Sayles & Company, Putnam Investment Management and PIMCO are other investors in the bond, according to eMAXX data.
Greece is no stranger to tense talks with its lenders, and in 2015 came close to leaving the euro zone before eventually agreeing to a third bailout package.
But its failure to stick to the terms of that deal and the reluctance of its main paymasters to cede ground in a move that could harm their domestic popularity ahead of elections this year, has put private funds in the firing line again.
The price of the bond fell to 95 cents in the euro on Tuesday, unusual for a bond so close to maturity that should trade slightly above par. Traders said that reflected around a 6 percent chance of default on that bond.
The cost of insuring against a Greek default has also spiked. Those contracts imply nearly a 50 percent probability of default over the next five years.
Fears of default could rise further in coming weeks.
European officials have warned that Greece must resolve the standoff by the next Eurogroup meeting on Feb. 20, before a number of states - starting with the Netherlands in March through to Germany in September - hold elections that will make negotiations politically difficult.
The last Eurogroup meeting on Jan. 26 concluded with no date set for lenders to return to Athens to complete the review. Greece on Tuesday said some of the demands were "illogical".
"Concluding the review once the crowded EU political cycle has started will prove extremely challenging. As such, early March seems the latest possible date for a deal," Societe Generale economist Yvan Mamalet said.
"Barring that, the July debt redemption will prove challenging."
Uncertainty over whether the International Monetary Fund will participate in Greece's third bailout, with senior figures in the fund opposing the fiscal targets set for Greece by the Eurogroup and demanding debt relief, could also raise the risk of non-payment.
Germany - Europe's biggest economy and Greece's main creditor - has said IMF involvement is a prerequisite for the third bailout programme.
Germany's Bild newspaper reported last week that Finance Minister Wolfgang Schaeuble would argue for a Greek euro zone exit if the IMF withdrew.
While that may be an extreme case, strategists at UBS said even the time it would take for European lawmakers to approve a new deal without the IMF would raise the risk of a default.
"Should the IMF not launch a new programme for Greece, a new approval by the Bundestag (and other European parliaments) would be required as the 2015 approval was contingent on the IMF being on board with a new programme," UBS wrote in a note to clients.
"However, if Schaeuble is forced to go back to the Bundestag for a vote on the Greek programme during the electoral season, this could create further problems ahead of Greece's bond repayment due in July."
(Additional reporting by Lefteris Papadimas in Athens; Editing by Alison Williams)