The yield on 10-year Greek government bonds jumped to a new 11-year high on Wednesday, while the cost of insuring Greek debt against default now exceeds the cost of insuring Icelandic debt, after the country’s government said it would revise up its 2009 deficit forecast.

The government said the deficit would be revised to around 12.9% of gross domestic product from an initial estimate of 12.7%, news reports said.The change, which had been expected, follows a steeper-than-expected 2% contraction in 2009 gross domestic product. The initial estimate was based on a 2009 GDP fall of 1.2%, Bloomberg said.

The yield on the 10-year Greek government bond jumped to hit 7.15%, the highest level in 11 years, from around 6.99% Tuesday. The yield premium demanded by investors to hold 10-year Greek government bonds over German bunds jumped to more than four percentage points.