Greece Risk Bloodbath Throws Italy And Spain Back In The PIIGS Default Mix

Tyler Durden's picture

And so we see another tipping point in action: while absolutely nothing has changed in the fundamentals of Europe's insolvent peripherals, today, for the first time since early January, we are seeing an absolute bloodbath in the risk gauges of the European periphery. As the PIIGS list below shows, spreads are surging, and while it is no surprise that Greece is now trading north of 1200 bps following a weekend full of Greek default chatter, the important observation is that Spain and Italy are once again in the default mix.

  • Portugal 615 (+15) - officially insolvent
  • Italy 156 (+13)
  • Ireland 588 (+21) - officially insolvent
  • Greece 1225bp (+89) - officially insolvent
  • Spain 250 (+16)

As usual we are amused by the massively delayed reaction in what some continue to foolishly claim is an efficient market. Of course, expect a major overshoot of all risk indicators now that the world's attention is once again focused on Europe. Exhibit A: EURUSD which is now at 1.4290, even as it was trading at 1.45 on Friday. Hysteria is back.

From Reuters:

The cost of insuring Greek debt against default rose on Monday after a newspaper report that Greece had asked to restructure its debt, though the country's finance ministry later denied the report. Five-year credit default swaps (CDS) on Greek government debt rose by 84 basis points to 1220 bps, according to data monitor Markit. This means it costs 1.22 million euros to protect 10 million euros of exposure to Greek bonds.

Greek finance ministry sources have denied a newspaper report that Greece told the IMF and the European Union earlier this month that it wants to restructure its debt.

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PolishHammer's picture

Don't pay attention to EU, BRICS is the new engine of growth for 21st century.


-J. Hatzius

Crisismode's picture

For about 2 more years of the 21st century . . . then, finito.

John McCloy's picture

Surely nothing a little more austerity cannot fix. Going to be entertaining to see how they try to patch together the Euro with bailouts and big talk in the next 6 months. 

Parity by end of 2011?

PolishHammer's picture

Parity with ZIM$$ if I have anything to say about it..


- B.Bernank

Dick Darlington's picture

We have insolvent sovereigns and then we have Moody's

04-18 07:12: Moody's say shift in budget debate positive for US 'Aaa' rating
squexx's picture

I wonder how bullish it is for gold plated uranium??!?

Crisismode's picture

It's VERY bullish for gold-plated Tungsten.

squexx's picture

Gold plated uranium IS the new gold plated tungsten!

Sudden Debt's picture

Very! You even get the free 2 mills zirkonium for free when you buy over 20 kg!!




scratch_and_sniff's picture

Careful with the shorting, Ransquak just said a US bank was selling...from my experience these guys have a knack for calling intraday swings with rumors of this kind.

Josephine29's picture

This situation goes on and on except the so-called rescue seems to have weakened the countries concerned. A very European sort of rescue perhaps. However as time goes by I think that more minds will turn towards thought like these below.

Is outright default now possible?

Yes. When I started this blog I pointed out how expensive such a move was likely to be and that it came with quite a few problems. However the situation has been so mishandled that it is by no means inconceivable now and may even be an improvement on the alternative.


Although the banking paymasters will hate even the prospect of this.

kaiten's picture

Euro went up too much recently, so Germans had to drop some euro-negative statement again. This time it was about debt-restructuring. I mean, Germany is the true eurozone leader, they always do what´s necessary for the euro.

TankWolf's picture

Ive always wondered whether or not GS and JPM and while Im at it the PPT for that matter are told by the Fed to attack PIIGS spreads whenever the US dollar is really starting to get into trouble. As pointed out unless there is some undisclosed news somewhere out in the market that the herd isnt privilaged to what other reasons could be for such a surge in spreads, I mean I realise they are all insolvant but they were all in the same situation last week, and many months before that.

Bokkenrijder's picture

Well, it must be all part of the Con Job of the Decade...


I guess big banks are loading up on high yielding and "low risk" government debt? ;-)

Steroid's picture

Its not PIIGS anymore. It is PIGSHIT: enter Hungary and Turkey.

writingsonthewall's picture

If one goes - the yields will be unsotppable - a new precedent will be set (like the one we used to have) and suddenly the markets will instantly change their opinion of 'risk' on sov. bonds.


This is why putting off D-day is never a good idea, instead of a gradual default of each nation - the EU has saved them all up and they will all go at once!

It will cause MORE panic in markets and spark defaults in countries which may have got away with it.


Got to love the idiocy of the EU - didn't really think through the next step whilst dreaming up the last one. Now it's bailout all forever - or default all at once.


The choice as they yours.

ZackAttack's picture

What I'm waiting for is DSK's apology for having pissed away the $1 trillion EFSF and forced austerity programs on millions to accomplish fuck-all.

DrunkenMonkey's picture

Like all the US gamblers shi**ing a brick over the inability to withdraw money from their PokerStars / FullTilt accounts, you'll be waiting a very long time.

Bubbles the cat's picture
Bubbles the cat (not verified) Apr 18, 2011 7:58 AM

Woohoo. Hysteria is such good fun. Where's my gas can?

Weimar Ben Bernanke's picture

The stupidity of the EU-philes boggle my mind. Debt reconstruction is needed so the banks take a deep haircut. However even this will not save the euro. There are two options for the EU:

A breakup of the Eurozone

Or an agreement on debt restructuring, bank haircuts and fiscal consolidation. New rules will be drawn out and fiscal union will be the final outcome. EU states will realize that in order to be part of a currency union, fiscal sovereignty will have to be sacrificed. To some extent, Federalization may be the route that the EU takes in its evolution to become an economically and politically linked union.

The latter is the ideal outcome for EU, but it is also most difficult to achieve. It requires nations to set aside their sovereignty and their cultural differences. Politically, I see an attempt by EU-philes to push for some sort of fiscal consolidation of the Eurozone with autonomy in Brussels. However, I can also see Euro-skeptics and nationalists push back citing sovereignty and democracy. This will be further hampered by historical animosity, and ethnic diversity. As such, I view the probability of this outcome as extremely LOW (some in Europe would say non-existent).

kaiten's picture

Well, eurozone breakup would mean an imminent european AND world depression, so the only real possibility is option 2.

Bubbles the cat's picture
Bubbles the cat (not verified) kaiten Apr 18, 2011 10:35 AM

Yeh. Which makes option 1 the likely outcome.

Thomas's picture

Why would anybody ever lend any money to Greece? They have an unblemished history of defaulting on loans.

DrunkenMonkey's picture

Presumably because they still have some assets they haven't "privatised" yet, like their lovely mediterranean islands ?

Nah, it was all bakshish for govt. contracts and weapons sales (particularly France (warships) and Germany (siemens contracts & submarines)).

Hannibal's picture

The Ultimate Framing: "numbers" on a computer screen. And so the framing and idiocy continues.

Bahamas's picture

"Trust a snake before a Jew, trust a Jew before a Greek, but never, never trust an Armenian".

George Orwell (down and out of Paris and london)


Lord Peter Pipsqueak's picture

The FX market appears to have decided money printing, inflationist central banks such as the Fed and the Bank of England have absolutley no intention of honouring their debts and as such, even a Frankenstein monster of a currency with odd body parts stuck together to a functioning "brain"(read Germany)is the lesser of three evils and presents a better long term bet.

Sure,the Fed and the Bank of England can say they haven't defaulted,but what will a dollar or a pound buy in ten -fifteen years time?And when all the money printing has finished,what will interest rates be in both countries?Well into double digits I expect,after all who would trust them ever again?What will the economic landscape look like then?

 Mad Max anyone?

Bubbles the cat's picture
Bubbles the cat (not verified) Lord Peter Pipsqueak Apr 18, 2011 9:01 AM

Economic landscape? Feudal. Political landscape? Fascist. Environmental landscape? Plundered i.e. if it moves, shoot it, if it doesn't, cut it down or dig it up.

But 10-15 years is a lifetime away. How 'bout we stick to a more realistic timescale say, 10-15 minutes.

Youri Carma's picture
“Germany’s leading economic research institutes have thrown their weight behind Berlin’s drive to persuade eurozone partners to agree on an insolvency mechanism for member states that are in effect bankrupt.

The arguments from the heart of Germany’s academic-economic establishment are likely to be used by Berlin in its efforts to persuade the rest of the European Union to set up a “crisis resolution mechanism” – an insolvency procedure in all but name – even if it means amending the EU’s Lisbon treaty.

See: Backing for EU insolvency pact, 14 October 2010, by Quentin Peel in Berlin (The Financial Times)

Dollar gains; German comments sink euro - Euro brushes off Ireland downgrade, higher inflation reading, 15 April 2011, by Deborah Levine and William L. Watts - New York (MarketWatch)

The dollar extended gains against the euro on Friday after a German official said Germany would back a voluntary restructuring by Greece of its debt.

German official's comments hit euro, analyst says, 15 April 2011, by Deborah Levine - New York (MarketWatch)

Comments from a German official indicating support for a Greek debt restructuring pushed the euro down further in morning trading Friday, analysts said.

A restructuring of Greek debt "would not be a disaster" and Germany would back a voluntary restructuring, Germany's Deputy Foreign Minister Werner Hoyer told Bloomberg.

Greek daily citing a ‘senior IMF official’ that Greece has asked the EU to consider maturity extension (google trans from Greek)

Restructuring speculation dogs Greece

Furious Greeks press for country to default on debt, 17 April 2011, by Helena Smith in Athens (The Observer – The Guardian)

Youri Carma's picture
Youri Carma: The Tulip Mania Solution or the Infinite Narrow Cliff Path, 22 January 2011, by Youri Carma (FPP)

Why not the Tulip Mania solution?, 29 April 2010, by Youri Carma (FPP),

Bank Of America Analyst Advocates The "Unthinkable" -- An Intentional Default On US Debt, 17 April 2011, by Joe Weisenthal (Business Insider)

The nation's $75 trillion problem, 8 April 2011, by Bill Fleckenstein (MSN Money)

A sobering look at federal spending from bond king Bill Gross suggests there are several creative ways to default on our national debt, and we are working toward all of them.