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And Now The Facts: German Regulator BaFin Sees "No Signs Of Massive CDS Speculation Against Greece"
Sorry, Merkel, Papanderou et al. BaFin finds that there is no sign that CDS speculation is involved when it comes to Greek government bonds, even as the volume in cash bonds has spiked. As a reminder - selling bonds has the same effect as buying CDS. And guess what: the real Greek cash-CDS basis is negative 112 bps (for "experts" this is swap-clean basis, i.e., Greek CDS minus German CDS compared to GGB minus Bunds). This means that cash bonds are far and ahead a leading indicator, and much more dominant when it comes to determining actual price/yield levels. So does this mean that GGB sellers will now be demonized with the same ferocity as those meddling CDS traders? Hopefully, this will finally be the end of the CDS as satan's spawn topic.
From Dow Jones:
German market regulator BaFin said Monday that so far, it doesn't see any sign of massive speculation in credit default swaps against Greek government bonds, despite some recent press reports suggesting this.
A significant reason behind widening CDS spreads is the increasing demand for insurance against Greek risk, BaFin said in a statement, adding that it closely watches the government bond and credit derivatives markets for selected euro-zone countries.
Credit default swaps are tradable, over-the-counter derivatives that function like a default insurance contract for debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries.
BaFin said data published by the U.S. Depository Trust & Clearing Corporation don't signal an increase in new open positions and don't indicate massive speculation. It is true, however, that the gross volume of outstanding CDS contracts for Greek government bonds amount to around $83 billion as of Feb. 12, according to DTCC, more than twice the $41.1 billion a year earlier.
The gross volume of CDS contracts for Greece, which mirrors the trading turnover, has fallen again in recent days, BaFin said. The net volume of CDS contracts, meanwhile, is a better indicator for possible speculation, BaFin said, adding that the net volume of outstanding CDS contracts has been largely unchanged at around $9 billion since mid-January, according to DTCC data.
Greek CDS spreads and the yield premium investors demand on Greek government bonds over German bunds have been narrowing in the past few days, as the market has been relieved by Greece's success in issuing EUR5 billion in a 10-year government bond last week. A further factor leading to spread tightening is French President Nicolas Sarkozy's announcement Sunday that a number of European Union countries were preparing a support package for Greece, even though he said he doesn't believe the Greek government will need financial help.
Greece's five-year sovereign CDS spreads fell to 283 basis points by early Monday from Friday's closing level of 301 basis points, according to CMA DataVision. That means the annual cost of insuring EUR10 million of Greek government debt against default for five years had fallen EUR18,000 since Friday to EUR283,000. This has been the first time since mid-January that Greece's CDS, which hit a high of 425 basis points Feb. 4, has been under 300 basis points.
By Monday afternoon it narrowed further to 270/280 basis points, according to a market participant
ddd
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World's largest hedge funds... led by your friendly local taxpayer implicitly backstopped bank.
http://www.fundmymutualfund.com/2010/03/worlds-largest-hedge-fund-backstopped.html
HUGE CDS NEWS
Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold
Now it appears even the investment companies do not trust paper currency. Well, they are smart and KNOW when to deal the cards.
END GAME, PHYSICAL GOLD WINS.
www.huffingtonpost.com/janet-tavakoli/washington-must-ban-us-cr_b_489778.html
"U.S. credit default swaps currently trade in euros. After all, if the U.S. defaults, who will want payment in devalued U.S. dollars? The euro recently weakened relative to the dollar, and market participants are calling for contracts that require payment in gold. If they get their way, speculators on the winning side of a price move will demand collateral paid in gold.
The market can create an unlimited number of these contracts very rapidly. The U.S. wouldn't have to ever default to trigger a major disruption in the gold market. Spreads (or prices) on the credit default swaps could simply move based on "news," and demand for gold would soar.
If this speculation drives up the price of gold, and the available gold supply becomes limited, are you willing to post your children as collateral? I am pushing the point so that we put a stop to this before it is too late."
Since when does any kind of scapegoating or demonization pay attention to logic? In this world, anyone desperate enough to shift blame will find a way to do it, all the way to the bitter end.
Mutual funds running out of cash reserves... notice served to GS and JPM its time to increase allocations to SPY futures buying.
http://www.bloomberg.com/apps/news?pid=20601110&sid=aUzn_mzqGl.8
Well, the WSJ says, "The cost of insuring Greek sovereign debt against default fell Monday after French President Nicolas Sarkozy said the European Union would support Greece if required to do so."
http://online.wsj.com/article/SB1000142405274870486930457510925025429291...
Again you are not comparing like with like
CDSs are betting slips and are not money - government debt is the closest thing to money in this admittedly flawed system.
Also it was reported in Saturdays FT that hedge funds were banned from buying the last Greek bond issue so they had no incentive to bet against the currency so that they can increase the yield of the bonds.
Oh PLUUEEEEZZE! If you really believe that speculators had nothing to do in exacerbating the moves on Greek bonds then I will free up some capacity in my now closed global macro hedge fund, ARHIDIA CAPITAL MANAGEMENT!! BaFin = BUFFOONS!!!!
Leo , you've never managed money , just allocated it to people who do. correct ? Your post demonstrates your ignorance.
Question : What goes down faster; 1) a market where everyones long or 2) a market where some people are short ?
Owners of Greek bonds selling them pushed the spreads out.....that seems so obvious to anyone who has traded for a living that it's barely worth writing yet you seem not to get it.
No, the only money I've managed is my own and hopefully it will stay that way for a long time. And despite your stupid question, I'm not an idiot but if you think excessive speculation wasn't behind the move in Greek bonds then you are smoking some reallt good shit.
instead of focusing on baaaaaaaaad speculators, one'd better wonder why big greece debt holders like most european central banks have been lending the greek paper they held over the past months, thus allowing the baaaaaaaaad speculators to sell it short.
Yes supposedly the Greek Government has issued fraudulent bonds in the recent past (according to some Greek judges anyway) and if you were a buyer or seller of Greek bonds you will be demonized.
Good luck to you if you are an owner of Greek bonds right now. Don't sell and they become worthless on default, sell and you go to jail.
I guess its just fund managers changing maturities, selling old buying new ones. And with net CDS not changing, the increase is just because of more trading. But trading doent change any YTM etc. Has nothing to do with massive Greek Bond Bashing etc. New Greeks Bonds are among the most attractive for sovereign funds right now...
I can't for the life of me conclude any other reason that zerohedge has an agenda here in defending cds's in any way shape or form. It's too bad. They are shit and we all know it. You are talking out of both sides of your mouth big time on this one.
Have you ever taken the time to consider that these swaps function as a protective option for bond buyers?
Bond yields are going to rise anyway. There is too much crowding out and increasing credit risk for them to stay at these historic and arguably pathological lows. Seen in this light, CDS discipline governments to get their fiscal house in order.
I hear a lot of solutions revolving around curbing "naked CDS" purchases. As a practical matter, not sure if it is easy to identify what naked means.
What I suggest is forget about telling firms and people what they can and can't do with their money. Set limits on overall bank leverage, require accurate Tier 1 capital reporting, and MTM.
What is going on here ? Are we misinformed deliberately by governments now, not only the mainstream media ?
On Saturday the leading German news Magazine "Der Spiegel" wrote: "The German banking and security supervision agency (Bundesanstalt für Finanzdienstleistungsaufsicht = Bafin) has clear evidence that speculators bet against greece."
http://www.spiegel.de/wirtschaft/soziales/0,1518,682136,00.html
hey tyler, do you really trust BaFin?
remember how they prevented all those massacres at IKB, BayernLB, HypoRealEstate,....?
you are loosing credibility tyler
Anyone really expected any different from German bullshiters knowing that Deutsch
bank is heavily involved with Greek bonds , or that Germans for the last 20 years
are trying to capture and corrupt political life in Greece , by their companies
1/ Ziemens, Germans they still cover and protect their hitman head of Ziemens in Greece,
denying to deliver him for passing trial in Greece for political corruption.
Millions of euro were paying to Greek politicians and political parties for taking jobs
worth of billions of course over-charging them, and most often defective.
2/ Hochtief, constructor and manager of Athens airport , still are accusations for overcharging
and non paying VAT to Greece
3/ Deutsch telecon , having bought the Hellenic Telecommunication Organization under mysterious
and non clear ways . Just today the European commission declared the buying as fraudelent .
4/ Greek PM Simitis (1996-2004) German educated , also his brother prominent politician in Germany,
denied decision of Greek High court for Germans to pay war compensation, and with hankypanky legal
tricks and by changing the president of High court denounced and cancelled the decision.
5/ Thyssen, having bought the larget Shipyard in Greece trying to sell submarines which on trials capsize ,
Germans insisting with audacity and by twisting hands Greece to accept and pay for them .
Also army tanks sold to Greece worth 2 billion proved defective.
If not by plan it seems German pigs have encircle Greece by corruption exploiting and sucking anything worth
has that country . Who gives a shit what they say
You must be Greek and I don't care. Let's fight this out on the soccer World Cup like men. Got Greece qualified ?
Fact is mate, everything in Greece is German-made. German industry made a lot of money using the money that Greece got from the EU (of which they only paid a part).
@21,20
Yes am Greek and you care or not, facts are facts and it hurts. Germans may have corrupted politicians but things will change soon as people here are very angry.
Last example of how Germans feel the indegrity the anonymous comment @16.35
""
On Saturday the leading German news Magazine "Der Spiegel" wrote: "The German banking and security supervision agency (Bundesanstalt für Finanzdienstleistungsaufsicht = Bafin) has clear evidence that speculators bet against greece."
http://www.spiegel.de/wirtschaft/soziales/0,1518,682136,00.html
""
p.s. Greece is qualified for world cup but don't try kick the ball out, not started yet.
@ Anon 3/9/2010 01:18
i can understand that you don't like the situation in greece but there are always at least two participants in every corruption case. one who pays and one who receives!
if you think it's only the "others" who are responsible for the situation in greece, take a rest. think for a minute.
who participated on both sides? ... and why?
@05.39
Noone claims the opposite, but Germans came here on a plan "creating climate" as they call the bribes, pondering on human nature. Nowdays undergoing 2 or 3 investigating commitees on Ziemens case but the main witness (head of ziemens in Greece) Germans are keeping him under custody refusing to deliver him for passing trial and finger the corrupted ones.
@03.21
Indeed Germans made a lot, on at least twice the worth, capsized submarines, defective army tanks whc accepted after Norwegians raised same claims, C4I security & detection system paid but never worked , we are talking on billions euro mate
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