THE GREAT BIG FAT GREEK THREAD

[The Masked Tulip]

London Metro had A 'Black Thursday' headline, but it was regarding the Public Sector Strikes.

Light-weights.

[_w_]

Looks like we are approaching endgame.

GREEK TWO YEAR GOVT NOTE YIELD CLIMBS TO MORE THAN 30% (via Bloomberg).

Bond rates going hyperbolic now. Busy weekend ahead.

[interestrateripoff]

Bond rates going hyperbolic now. Busy weekend ahead.

Our central bankers will be very busy writing blank cheques in secret.

30%, pretty soon Greek lending will be at Wonga levels. We've already gone past Brighthouse levels.

[interestrateripoff]

Bond rates going hyperbolic now. Busy weekend ahead.

http://www.zerohedge.com/article/greek-cds-hits-ridiculous-1900-bps-total-chaos-over-what-happens-next-ongoing-greek-ruling-p

This morning Greek CDS is trading at a spread of 1,900 bps: a level that seals the fate of Greece, whose bonds are being sold into a bidless market. Two primary factors have totally shocked the market: one is that, as Reuters, reports, Germany now "wants the deadline for for a second Greek rescue package to be pushed back to September, reflecting the problems Europe is having hammering out the details, EU and banking sources said on Thursday." This means that Greece may well run out of cash in the interim, but it appears that Germany is now fine with that outcome. The other news comes from Athensnews.gr which reports that the exodus of MPs from ruling PASOK is now picking up: 'Ruling Pasok MP Yiorgos Floridis on Thursday tendered his resignation, the second ruling party MP to resign in the space of two days, followed by Ectoras Nasiokas, Larisa Pasok MP. George Lianis was the first Pasok MP to resign on Tuesday afternoon. In addition, veteran Pasok MP and former minister Vasso Papandreou asks for an extraordinary meeting of Pasok parliamentary group. Floridis resigned from his MP post, but did not declare himself an Independent, thus in effect "returning" the seat to Pasok." With the PASOK already slender majority in parliament in its current formation, these ongoing defections mean that, just as we warned, the mid-term fiscal proposal will likely fail in parliament and Greece will do what Ireland should have done, and what in fact Greece should have done a year ago, and voluntarily leave the eurozone. It also means that keep a close eye on the FRA-OIS and Libor-OIS spreads as today all liquidity hell can break loose now that a break up of the eurozone appears certain.

Seems the CDS spreads are going nuts as well.

Doesn't this mean to insure 10m Euro in Greek bonds it will cost 1.9m Euro?

[Pent Up]

the first sovereign default appears to be almost here.

Europe Faces ‘Lehman Moment’ as Greece Unravels: Euro Credit

June 16 (Bloomberg) -- The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives.

The euro lost more than 2 percent against the dollar in the past two days and the cost of protecting corporate bonds soared to the highest level since January, with credit-default swaps anticipating about a 78 percent chance that Greece won’t pay its debts. Equities declined around the world, while a measure of fear in fixed-income markets jumped the most since November.

Europe Faces ‘Lehman Moment’ as Greece Unravels

Market moves suggest heightened concern that authorities won’t be able to keep Greece’s debt troubles from spreading after Moody’s Investors Service said it may downgrade BNP Paribas SA and two other big French banks because of their investments in the southern European nation. The collapse of Lehman Brothers Holdings Inc. in September 2008 caused credit markets worldwide to freeze as investors fled all but the safest government debt.

“The probability of a eurozone Lehman moment is increasing,” said Neil Mackinnon, an economist at VTB Capital in London and a former U.K. Treasury official. “The markets have moved from simply pricing in a high probability of a Greek debt default to looking at a scenario of it becoming disorderly and of contagion spreading to other economies like Portugal, like Ireland, and maybe Spain, Italy and Belgium.”

Europe Faces ‘Lehman Moment’ as Greece Unravels

New Government

Lehman’s collapse contributed to $2 trillion in writedowns and losses at the world’s biggest financial institutions, data compiled by Bloomberg show, and central banks cut interest rates to record lows as economies slipped into recession.

Markets were roiled yesterday as Greek Prime Minister George Papandreou said he would name a new government and call a vote of confidence in Parliament as he seeks to pressure rebel lawmakers to back an austerity plan that would secure a new bailout. The MSCI World Index fell a further 1.1 percent today, while the Swiss franc rose to a record against the euro.

Papandreou needs to clinch a parliamentary vote on a 78 billion-euro ($110 billion) five-year package of budget cuts and asset sales by July to ensure the country receives a new EU aid package to avoid the euro-area’s first default.

“Our duty is to the nation, not to political parties,” Papandreou said in comments televised live on state-run NET TV. “I will form a new government and immediately afterwards seek a vote of confidence in Parliament. It is a time for responsibility.”

‘Armageddon Scenarios’

Papandreou’s options narrowed as his bid to garner support from the biggest opposition bloc failed, party allies turned against him and police deployed tear gas to break up anti- government protests in central Athens.

“This is by no means the end of the story, but based on current majority, such a motion should pass,” Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London, wrote in a note to clients yesterday. “If not, then Armageddon scenarios come into play, which include default and potentially the whole contagion scenario plays out.”

Earlier this week, Standard & Poor’s slashed Greece to CCC from B, handing the nation the world’s lowest credit rating and noting it’s “increasingly likely” to face a debt restructuring.

Greece’s unemployment rate jumped to 15.9 percent in the first quarter from 14.2 percent in the last three months of 2010, the Hellenic Statistical Authority in Athens said today. The jobless rate, at a record 16.2 percent in March, has climbed faster than projected under last year’s 110 billion-euro bailout.

Sticking Point

The current sticking point is how to engage private investors in the next stage of rescuing Greece. European Central Bank authorities, including President Jean-Claude Trichet, have pushed back against German plans to lengthen the maturity of Greek bonds, leaving open only the option to persuade bondholders to voluntarily reinvest the proceeds of maturing debt into new securities.

“Keeping existing creditors engaged is far from trivial, as it involves a combination of incentives and penalties,” Francesco Garzarelli, a strategist at Goldman Sachs International in London, wrote in a report yesterday. “If the transactions are to be completed on a ‘voluntary’ basis in order not to trigger a default event, the ‘hold out’ problem is material” as persuading all lenders to move in lockstep is difficult, he wrote.

Moody’s placed the ratings of BNP Paribas, France’s biggest bank, and local rivals Societe Generale SA and Credit Agricole SA under reviews that will focus on their holdings of Greek public and private debt “and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the firm said in a statement.

‘Ripple Effect’

“This is a ripple effect of the Greek crisis spilling into European banks,” said Sarah Hewin, a senior economist at Standard Chartered Bank in London. “Clearly, there would be an impact if there is an escalation” of the situation, she said.

German lenders were the biggest foreign owners of Greek government bonds with $22.7 billion in holdings last year, according to data compiled by the Bank for International Settlements in Basel, Switzerland.

French banks, which led the group of Greek creditors with overall claims amounting to $56.7 billion, trailed their German peers on sovereign debt with $15 billion, according to the June report from the BIS. The figure for French banks was inflated by $39.6 billion in lending to companies and households, mainly because of Credit Agricole’s Greek unit, Emporiki Bank SA. German lenders have no major units in the country.

At the end of 2010, Greek government bonds held by banks in countries reporting to the BIS totaled $54.2 billion, of which 96 percent was owned by European lenders.

Swap Spreads

U.S. interest-rate swap spreads, used to gauge investor perceptions of credit risk, widened the most since November after the announcement about banks by Moody’s.

The difference between the U.S. two-year swap rate and the comparable-maturity Treasury note yield, known as the swap spread, widened 5.06 basis points to 25.15 basis points. That was the largest increase since Nov. 30, when the gap widened by 6.5 basis points. The spread is based in part on expectations for the London interbank offered rate, or Libor.

“There is some worry that with what is going on in Greece there will be downgrades and this will cause a problem in funding and result in a rise in Libor,” said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG. “Swap spreads are widening as direct result.”

The yield on two-year Greek notes rose to a record 28.85 percent and 10-year bond rates gained 14 basis points today to 17.86 percent. The cost of protecting Greece against default climbed 74 basis points yesterday to an all-time high of 1,844 basis points in London, prices compiled by CMA show.

Government Bonds

The contracts, which typically rise as investor confidence worsens and fall as it improves, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Bonds across the euro region underperformed German debt, Europe’s benchmark government securities. The extra yield, or spread, investors demand to hold Greek 10-year securities instead of similar-maturity bunds climbed today to 1,493 basis points, or 14.93 percentage points, while Irish, Spanish and Italian spreads also widened.

The securities of so-called core members of the currency bloc also underperformed relative to German debt, with 10-year yield spreads between Austrian, French, Belgian and Dutch debt over bunds widening. The yield on the German bund dropped 3 basis points to a five-month low of 2.92 percent.

Euro, Swaps

The euro depreciated 0.5 percent today to $1.4109, the weakest in three weeks, while demand for options that protect against a drop in the euro versus the U.S. currency is at the highest level in a year as the EU struggles to contain the sovereign-debt crisis.

The premium for euro three-month put options granting the right to sell the currency against the greenback reached 2.54 percentage points yesterday over calls, which allow for purchases. That’s the most since June 2010 on an intraday basis.

In the corporate bond market, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.25 basis points to 114, the highest since Jan. 10, according to JPMorgan Chase Co. The gauge has risen from the low this year of 94.3 on April 8.

“Nervousness has intensified,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “The market is increasingly fretting that the components won’t be in place for a bailout package. You see signs of contagion spreading. Until we see a resolution with the situation in Greece, you’ll see a flight to quality.”

To contact the reporter on this story: Mark Gilbert at magilbert@bloomberg.net ; Liz Capo McCormick in New York at Emccormick7@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net .

[interestrateripoff]

The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives.

The failure was to try and contain the problem. You can't contain insolvency.

The Greeks are broke they have no money.

[RufflesTheGuineaPig]

GREEK TWO YEAR GOVT NOTE YIELD CLIMBS TO MORE THAN 30% (via Bloomberg).

Hard to believe anyone is still buying? Oh wait... pension fund managers.

I can forsee lots of court cases in a few months with the people that blew investors money on this worthless debt being sued, or possibly even killed or physically harmed, by the people who's money they lost on what was clearly an appalling investment... at best a crap shoot, at worst deliberately losing money.

[Snafu]

I am going to Greece on holiday for a week on Monday. Will it still be there?

[interestrateripoff]

Hard to believe anyone is still buying? Oh wait... pension fund managers.

I can forsee lots of court cases in a few months with the people that blew investors money on this worthless debt being sued, or possibly even killed or physically harmed, by the people who's money they lost on what was clearly an appalling investment... at best a crap shoot, at worst deliberately losing money.

The pension issue is going to be an interesting discussion.

[Georgia O'Keeffe]

I am going to Greece on holiday for a week on Monday. Will it still be there?

Why dont you ask the agent for a late swap for Gaza (you may have to stump up the difference)

[Pent Up]

I am going to Greece on holiday for a week on Monday. Will it still be there?

Almost certainly not...

[fluffy666]

I am going to Greece on holiday for a week on Monday. Will it still be there?

This is one of the things the banksters will always try to distract you from..

If Greece defaults, then it will still have the same territory, same buildings, same infrastructure, same people.. the worst thing they can do, of course, is to hand over ownership of these and then default. You might say they they will be unable to raise debt internationally again (or at least for about 6 months, when the financial markets forget); that might be a good thing..

[cica]

A whole country is about to implode and the BBC are more interested in some old fart called Ayman al-Zawahiri becoming a leader of Al Qaeda.

[The Masked Tulip]

A whole country is about to implode and the BBC are more interested in some old fart called Ayman al-Zawahiri becoming a leader of Al Qaeda.

Incredible isn't it.

[Superted187]

SO what happened 15 years ago?

[moonriver]

Incredible isn't it.

Indeed, it amazes me how coming on here, seems to be the best place to find out the real world economy news.

And tuning into Bloomberg seems to give a more accurate view on EU economics than the BBC does.

[tahoma]

And tuning into Bloomberg seems to give a more accurate view on EU economics than the BBC does.

The BBC are a Statist broadcaster, they want everyone to believe that there is always piles of other peoples' money there for the taking as long as your politics are correct enough.

[_w_]

I'm wondering if the Northern states haven't decided to throw Greece to the wolves.

We hear today that the EU would pay the next tranche of the first Greek bailout but that's not the problem.

From what I understand the problem is the IMF's next tranche which the IMF rules say can't be paid unless Greece can show guaranteed financing for the next twelve months. That is something Greece doesn't have without a second EU bailout.

By saying we'll pay the next tranche and wait a bit (until after the IMF decision) to discuss a second bailout it looks like the EU is just giving up on Greece. That's unless the french orange woman can bamboozle the rest of the IMF into accepting to breach their own rules.

We could have an 'unexpected' default in the works.

[The Masked Tulip]

I'm wondering if the Northern states haven't decided to throw Greece to the wolves.

I think French banks are owed about 53 billion by Greece, German banks about 25ish billion - what is a billion here or there - and Brit banks owed about 13 billion.

That would mean a banking crisis in those 3 countries immediately it was known. Nah, that would also mean the end of the Euro 'dream'.

[interestrateripoff]

I'm wondering if the Northern states haven't decided to throw Greece to the wolves.

We hear today that the EU would pay the next tranche of the first Greek bailout but that's not the problem.

From what I understand the problem is the IMF's next tranche which the IMF rules say can't be paid unless Greece can show guaranteed financing for the next twelve months. That is something Greece doesn't have without a second EU bailout.

By saying we'll pay the next tranche and wait a bit (until after the IMF decision) to discuss a second bailout it looks like the EU is just giving up on Greece. That's unless the french orange woman can bamboozle the rest of the IMF into accepting to breach their own rules.

We could have an 'unexpected' default in the works.

You also have to wonder if AIG have positions on this?

She is a lawyer so no doubt she'll be able to come up with a legal position that allows the IMF to break it's own rules without technically breaking them. Her candidacy for the job makes more sense now.

[_w_]

I think French banks are owed about 53 billion by Greece, German banks about 25ish billion - what is a billion here or there - and Brit banks owed about 13 billion.

What if French banks are on the hook for 50% of 3 times total Greek debt via CDSs?

That would mean a banking crisis in those 3 countries immediately it was known. Nah, that would also mean the end of the Euro 'dream'.

More like a nightmare for the northern countries if you ask me. They might have decided enough is enough and let the French fix their own mess. The Germans seem to be eerily confident that their banks can take the shock (perhaps they bought CDSs).

[Lepista]

(perhaps they bought CDSs).

...from the French?

[R K]

What if French banks are on the hook for 50% of 3 times total Greek debt via CDSs?

More like a nightmare for the northern countries if you ask me. They might have decided enough is enough and let the French fix their own mess. The Germans seem to be eerily confident that their banks can take the shock (perhaps they bought CDSs).

Whilst Merkin and Sarko are playing chicken the Greek people are deciding for them.

Spanish yields starting to blow out now too...........Merkin really needs to stop fannying around now.

[R K]

Dollar backdraft (as we've been saying)

http://ftalphaville....-all-the-world/

(oops wrong thread, sorry)

Edited June 16, 2011 by Red Karma

[_w_]

...from the French?

Ach! We haf you surrounded!