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ralphmalph

Greece About To Kick Off Again

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8088261/Greece-reignites-Europe-debt-woes.html

Now we will see how strong the German and French banks are.

It all makes sense why France and Germany want binding written commitments on no default in the Lisbon Treaty, Greece has just told them "We are going to go bust and default."

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Spreads on 10-year Greek bonds jumped 31 basis points to 9.57pc :o

Maybe some of our foreign aid will do the trick, now Britain is booming :D

10% seems like pittence when an opposition party says they're going to default.

You're basically giving them your hard earned money for free.

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Spreads on 10-year Greek bonds jumped 31 basis points to 9.57pc :o

Maybe some of our foreign aid will do the trick, now Britain is booming :D

Based on the news today, that is not enough, rates should be near 15 to 20%. Of course the higher the rate gets, the greater the likelihood of default becomes due to the higher interest repayments on new debt.

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10% seems like pittence when an opposition party says they're going to default.

You're basically giving them your hard earned money for free.

THat is bonds already issued not the price that Greece can issue new bonds, I think that might be rather higher in the future.

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THat is bonds already issued not the price that Greece can issue new bonds, I think that might be rather higher in the future.

I might misunderstand bond investing, but why make a distinction between new and existing bonds? Would you put your own money into Greek debt for a 10% yield?

For even a speculative punt I would need about a 40% yield (Argentinean debt traded at these levels when I looked at it a year ago). Some form of default within the next few years is inevitable, it's just a question of when and how.

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I might misunderstand bond investing, but why make a distinction between new and existing bonds? Would you put your own money into Greek debt for a 10% yield?

For even a speculative punt I would need about a 40% yield (Argentinean debt traded at these levels when I looked at it a year ago). Some form of default within the next few years is inevitable, it's just a question of when and how.

I think it means that as more debt gets issued, you need to issue at a higher yield to attract more buyers. Those who already want Greek debt at current yields would have bought it. To tempt yet more out of the woodwork requires a higher yield.

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Opposition Party to Stand on Manifesto of Default

If they are clever they can force the hand of Germany. They have to much debt, there is no way of repaying it, the current plan is simply forcing misery on to Greek citizens. They need to restructure and they need to devalue to get back to growth. They can't leave the eurozone, they can't be forced out.

Controlled default is the best option, they may be able to force Germany to bring back the DM giving them a chance of recovery.

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So, is there a possibility that this might cause another banking panic and cause IRs to rise... some hope...

Default is the best option for everyone except the banker nations. Looks like Greece is yet another place the bankers will not be relocating to.

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10% seems like pittence when an opposition party says they're going to default.

The New Democracy Party are the main opposition and they've only made vaguely supportive noises. The defaulters are the anti-memorandum bloc. They're doing well at the moment but Greece has been a two party show for quite a long time now.

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I might misunderstand bond investing, but why make a distinction between new and existing bonds? Would you put your own money into Greek debt for a 10% yield?

For even a speculative punt I would need about a 40% yield (Argentinean debt traded at these levels when I looked at it a year ago). Some form of default within the next few years is inevitable, it's just a question of when and how.

Becuase the bonds are already in circulation, priced at a lower yield - e.g. 4 or 5%. What has happened is that the price of the bonds has dropped to reflect the risk.

E.g. last year, I might have bought a 5% 10 year bond. I might have paid €100 for a €100 face value bond - which pays €5 per year for 10 years, then €105 in the final year.

However, the price might now have fallen to €70 for €100 face value. I still get €5 per year + €105 in the final year. In effect, I'm getting 'interest' of €85 over 9 years - or about 120% over 9 years - or 13.5%.

The reason the bonds are still trading at this sort of level is because:

1) bondholders still expect to get some interest for a couple of years.

2) In the event of default, they are still very likely to get a good proportion - maybe 50% of face value back. In effect, you could pay 60% of face value for relatively little risk, unless you consider default extremely imminent.

The point is that as the bond yields go up, so the risk to any newly expended capital goes down (as you expend less capital buying the same number of bonds - which are unlikely to return zero).

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The New Democracy Party are the main opposition and they've only made vaguely supportive noises. The defaulters are the anti-memorandum bloc. They're doing well at the moment but Greece has been a two party show for quite a long time now.

However given the unhappiness of the Greeks they may get widespread support.

If I was one of their candidates I would be taking out lots of life insurance, just in case they get an invite from Klaus the Burly German tourist to go hillwalking.

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Now, I thought I'd read not long ago in AEP's column that Greece was doing really well in terms of deficit reduction, that this year it was already down to about 7% of GDP.

Has anyone been following this and can give a bit more detail as to the true situation, ta?

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I might misunderstand bond investing, but why make a distinction between new and existing bonds? Would you put your own money into Greek debt for a 10% yield?

For even a speculative punt I would need about a 40% yield (Argentinean debt traded at these levels when I looked at it a year ago). Some form of default within the next few years is inevitable, it's just a question of when and how.

Niall Fergusson comments in The Ascent of Money that Argentina got off very lightly.

Long term, the Argentinian default has helped the country to start growing again and bond markets seem to have forgotten.

Greece should default given the unfairness of the distribution of pain.

And a point to remember - Papandreo's Pasok is a party of the LEFT wheras New Democracy, the party threatening default, is of the Right.

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Now, I thought I'd read not long ago in AEP's column that Greece was doing really well in terms of deficit reduction, that this year it was already down to about 7% of GDP.

Has anyone been following this and can give a bit more detail as to the true situation, ta?

Greek debt figures are being updated by the Eurostat / IMF auditors in two weeks. The data was meant to be released on the 22nd of this month but was delayed...

You may be interested to read this:

http://www.philip-atticus.com/2010/10/pending-confirmation-of-higher-greek.html

Looks like the deficit for 2009 may be 15%+

Interestingly there are local election on the 7th and the data is now coming out the week after. Hmm....

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Isn't default the best option for everyone?

default is not an option, its an inevitability...wouldnt be if most other nations werent also in massive debt, but, lets face it, they are, and the ones that arent have no interest in handing spare cash to the Greeks.

Bankers wont help...they dont understand the concept of "Give"...even the supposed bail outs were "facilities", "loans", "support". Bankers only understand TAKE and LEND. Indeed they have a special word for "Give"...its called DEFAULT.

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