Friday, February 12, 2010
The “new sub-prime”
Q. Is sovereign debt the "new sub-prime"? A. It looks like it. Greek government bonds give you a return of almost 7 per cent â€“ but with the risk of default. Default could spark a massive sell-off of government bonds within the eurozone and maybe further afield, representing a gigantic destruction of wealth. So Greece may be small â€“ 3 per cent of EU GDP â€“ but it could start something that would make sub-prime look like a tea party.