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Greece 10 Years Back To Crisis Levels As Germany Refuses To Subsidize Greek Interest Rates
Greece has been largely forgotten by the media over the past 2 weeks. This is somewhat perplexing in light of what is happening over in Europe: 1) Greek 10 Year spreads are back to crisis levels, hitting 6.53% today, 50 bps higher than the sub 6% reached in early March when speculation that the EU would fix everything; 2) German disagreements with other eurozone countries on the shape of the Greek bailout are getting more acute by the day, and this is nearly a month after the European "bailout" has been announced.
Even as the S&P dropped in February on Greek fears in early February to the YTD lows on February 5, coupled with a spike in GGB 10 Years to 7%+, since then the S&P has been rising at a 60 degree angle, even as the yield on the Greek bond is now chasing to catch up with S&P rate of increase. There are no news that can shake the conviction of the S&P that Dow 36,000 is next.
Also, we get more details on the schism between Angela Merkel and everyone else as pertains to the Greek bailout package, via the FT. Basically Germany says Greece has no choice but to raise debt at market rates, or in the 6-6.5% rarnge.
Most eurozone nations are prepared to offer loans at 4 to 4.5 per cent, the rate paid by the eurozone’s other other big debtors, Ireland and Portugal, EU officials told the Financial Times. But Germany says Athens should pay 6 to 6.5 per cent, the rate it pays on its 10-year bonds.
Donor nations would be able to refinance money lent to Athens at the lower rate without themselves losing money. Germany, these officials said, took the view “unsubsidised” rates meant Greece could only borrow at rates it last paid on the market. Berlin fears a veto from its Constitutional Court if it agrees to cheaper financing.
“If you say Greece’s whole consolidation effort is endangered by it paying such extremely high spreads [against German government bonds] you have to ensure the spread comes down,” one senior EU official told the FT.
“But the Germans say the Greeks have lived beyond their means, they must solve their problems themselves” – and thus pay 3 percentage points more in interest, or twice as much, as Berlin pays on its 10-year bonds.
Greece is pushing for an emergency-loan rate of 4 to 4.5 per cent. “A comparable rate to Portugal is what we’d like to see,” an official said – even as hope is growing in Athens that help might not be needed until later this year.
Just like in the China CNY revaluation case, the more Greece pushes for a tighter spread as the "fair" one on its debt, the more the bond market will keep calling its bluff. It is quite possible that the 10 Year will hit 7% in the very near future. The only thing Greece does have going for it is that its curve is at least not inverted. And with the 3 Month yielding almost 4%, the bond market is very concerned about what may happen with Greece by July, let alone 2011. Oh, and anyone who bought any of the recent 5, 7 and 12 Year Issues, is out of the money.
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Now you've gone and upset Leo again. Liquidity tsunami! Liquidity tsunami!
As I understand it the Greek citizen is rich because he doesn't pay taxes. His country is poor for the obvious reasons. Maybe the Greeks aren't as stupid as we think.
Guys at EuroIntelligence say, Greece Will Default For Sure
"It doesn't take rocket science to do the math.
Basically, Greece has a budget deficit before interest payments of 7.9% right now. At the same time it is paying about 6% on its marginal debt (any debt it issues today, and actually the value is a bit higher right now for ten-year bonds).
In order for Greece to simply stop increasing its total outstanding debt, it thus has to achieve a primary budget surplus of about 7.44% if interest payments are not to push the budget into deficit, according to Mr. Münchau. This is assuming the economy doesn't grow. If the economy can manage 2% growth, then Greece needs a 4.96% budget surplus just to tread water. Note that Greece's economy is actually contracting right now. If it continues to contract, then a budget surplus well above 7.44% will be required just to keep total debt from increasing. (not even bringing debt down)"
http://www.eurointelligence.com/article.581+M55425064846.0.html
Im not a rocket surgeon but it seems that the US resembles that post, taking away the lighting quick printing machines that is.
There's a typo here. Clearly you meant S&P 36,000.
BSinc- S&P obviously cant get to 36,000, at least not until unemployment reaches 90% levels or so...my take anyway!
;D
Yep. I'm planning on taking profits at S&P 35,000 when the unemployment rate reaches 85%. No point in being a pig!
If you think Greece had/has the ability to roil markets (some say a greek default would make lehman look like a picnic) you havent seen anything yet.
Spain is the big game. They're going to need to plunder alot more Aztec Gold to get out of this one.
"Aztec Gold"???
Spain doesn't need Gold, they need REAL money, like Euros, or Dollars, or Yen... maybe Baht... but definitely not GOLD BITCHES!!!
DOWN/Sell button removed from the computer.
DANG and I thought Greece was fixed, and more equity market pumping had a flashing green light! Man I'd love to be a fly on the wall inside the FED these days.
I thought Greece was bailed-out just like Dubai was.
Too bad Greece doesn't have the fiscal prudence that Dubai has...
Who is surprised that Greece wants a lower rate "out of fairness" when the US.gov promotes the exact same for its McMansion consumers who "for no fault of their own" can no longer afford the payment?
Remember when markets used to set rates?
It's nOt my fault!
No, I'm definitely not old enough to remember when markets set rates...
Why worry, why complain, just cut over to the long side....good way to end the pain, fianicla suicide.
It's actually kinda beyond just "can I make money today going long". I went long on Thursday afternoon (rule-based trading which I use to overcome emotion), so I'm fine to "take the money and run" (as a trader I respect immensely used to advise), but there are bigger fish to fry here than simple day-trading profits. Like, our whole way of life and whether or not it will survive.
Plus, anyone who thinks their long-side profits aren't going to go to fund a bunch of government crap programs via confiscatory taxation didn't read the earlier post. So, even if you make money today, it won't be yours tomorrow.
Agreed! Totally laborious (day trading) exercise. Today's chart on GDP Debt vs tax rates is alarming in that there's seemingly so much room to spike 'em. We're screwed no matter what we do. There no longer any laws of gravity. Where's Newton when you need him?!
Greece is calling Germany "racist". Soon anyone who dare to work hard and save will be considered "racist"...
http://www.elpais.com/articulo/economia/Atenas/denuncia/Berlin/creen/gri...
Thats a good sign for Germany. Go Racist!!
This 2 month melt-up just seems too managed given current events. I keep expecting to see the major indices open 10% down to slaughter all the momos.
If the melt-up is managed, how would a 10% down happen? Only, if it's managed?
Precisely...
The momo's will be slaughtered , its just a matter of time. The question is , will they be made into bigmacs or pork scratchings.
Not a one day phenomena either. It'll shake the momos so badly, the entire sentiment would change and bust the hopes and prayers of all the minions who thought it was again safe to spend money after they got their latest brokerage statements! Yeah, that'll just about cap it for good!
They will be blended with green shoots, ouzo and a bit of salt, and served with whine.
Merkel get's one thing right: 6.25% might be considered cheap here pretty soon. of course life is cheap. as they say in Alaska "in New Orleans for $100 you can get a guy killed. And in Anchorage that's $75 too much."
And why should they subsidize it anyway. Germany is making them walk on hot coals and to remember this, if the other countries want 4 to 4.5 percent then let them loan Greece the money and Germany will sit it out. They are mad because they want Germany to put up the most of the loan to Greece yet don't want them to make the decision of what the interest rate will be.
everyone would love to be an inside man ...specially inside the FED
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