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(anyone fancy a punt!?) :D German banks (and Barclays, RBS) will suffer for all the CDS they wrote on greek debt.

http://www.bloomberg...ker=GGGB1YR:IND

gggb1yr.jpg

I think your reading it wrong

Face value at issue will be 100 with a given coupon

So governments issue various yield bonds. 2% 5% 7%...quite a range.

Then they sell these bonds. The price however isn't 100. They sell them at about the meer Kay rate.

So for instance if you want to issue a 1yr 1B bond yielding 5% but the going rate is 10% it means you can only sell it for approx 950m. The buyer gets your 5% interest & you redeem the bond at face value and give said person 1000m. Overall he gets about 10%

So that 97 point whatever means the government is selling at a discount of about 3%. If they are offering a coupon of 5% total interest is aprox 8%

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Does this mean that the price of the bonds has dropped so low that the yield in one year, would be 98%? If so, presumably this is because investors think it is extremely unlikely they will ever get paid or get any of their capital back?

Sorry to sound thick, just trying to understand

He is reading it wrong. They are trading at about 2% discount. If the coupon is say 5% then it is yielding approx 7%

100- 97.96 = 2.04%

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Cells, NO! - this is the YIELD.

This is the return on a 1 Year bond. 98%.

I am definitely not reading this wrongly. The price of the bond has dropped to 50% of par; so you double your money if you hold it (successfully) for a year without default.

I know it's shocking, but that's what it is! - google "Greek 1yr yield" if you don't believe me.

e.g.:

http://www.thepeacockden.com/2011/08/similar-patterns-seen-in-selected-yield.html

(old, only a 60% yield :D:D:D )

I'm wondering is 100% the ceiling - or could the bond drop to 25% of par for a yield of 300%? Has this ever happened?

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I'm wondering is 100% the ceiling - or could the bond drop to 25% of par for a yield of 300%? Has this ever happened?

Argentina paid back as little as 25% of the face vale of is bands - http://en.wikipedia.org/wiki/Argentine_debt_restructuring

On that basis the value of Greek bonds could halve yet again. I'm sure vulture funds are standing by to hoover up Greek bonds, sue in foreign courts and then try to seize Greek government assets overseas.

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this is much more important than that,

as the yield rises, the banks which used tobe counting on bonds as effectively reserves, now have much, much less. At some point they have to admit this in their accounts, as usual this will be brushed under the carpet, but sooner or later it will happen.

the real result is that bank lending is strangled and we all know what happens then.

politicians don't like to make unpopular decisions, so they handle things like this in one of two ways, they either borrow and hence lend more money i.e. spend their way out of it, after all it's not their money is it, or if borrowing is becoming difficult and unpopular they dither, in this case dithering will be bad

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I think your reading it wrong

Face value at issue will be 100 with a given coupon

So governments issue various yield bonds. 2% 5% 7%...quite a range.

Then they sell these bonds. The price however isn't 100. They sell them at about the meer Kay rate.

So for instance if you want to issue a 1yr 1B bond yielding 5% but the going rate is 10% it means you can only sell it for approx 950m. The buyer gets your 5% interest & you redeem the bond at face value and give said person 1000m. Overall he gets about 10%

So that 97 point whatever means the government is selling at a discount of about 3%. If they are offering a coupon of 5% total interest is aprox 8%

The graph goes from < 10 on the left, which somewhat undermines your argument.

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Cells, NO! - this is the YIELD.

This is the return on a 1 Year bond. 98%.

I am definitely not reading this wrongly. The price of the bond has dropped to 50% of par; so you double your money if you hold it (successfully) for a year without default.

I know it's shocking, but that's what it is! - google "Greek 1yr yield" if you don't believe me.

e.g.:

http://www.thepeacockden.com/2011/08/similar-patterns-seen-in-selected-yield.html

(old, only a 60% yield :D:D:D )

Just to confirm, you are correct. The yield is now so high that it looks like a bond price rather than a yield. If anyone has any doubt, go to the Bloomberg link and click on the 5 year time span button.

So what are the implications? The Greek bailout has collapsed and Greece is now frozen out of the debt markets. The ECB is in disarray over the bond buying programme. I think that Greek default is the likely option and that could take a whole load of banks with it.

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Just to confirm, you are correct. The yield is now so high that it looks like a bond price rather than a yield. If anyone has any doubt, go to the Bloomberg link and click on the 5 year time span button.

So what are the implications? The Greek bailout has collapsed and Greece is now frozen out of the debt markets. The ECB is in disarray over the bond buying programme. I think that Greek default is the likely option and that could take a whole load of banks with it.

What implications for mortgage lending in the UK?

Edited by dances with sheeple
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Just to confirm, you are correct. The yield is now so high that it looks like a bond price rather than a yield. If anyone has any doubt, go to the Bloomberg link and click on the 5 year time span button.

At the risk of labouring the point, just to make sure I'm reading it right....

The graph is for the 1 year bond yield, which is the coupon value relative to the current trading (mid?) price. We have 97.96 as the closing yield and the big green value means yield up 3.4% (relative not total) on the day. Any change in the yield is due to the trading price of the bond fluctuating as the coupon is fixed.

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