Greece Sets 10 Year Bund Spread Level For When Total Pandemonium Breaks Out At 450 bps

Tyler Durden's picture

Greek website reports that today's breach of 400 bps in spread to bunds on the 10 Year GGB is a very critical level, and that if spread widening continues, Greece "risks completely losing control" of its funding situation. The critical level in the 10 Year GGB spread to bunds beyond which all hell will break loose is 450 bps at which point "everyone will unload bonds and then control will be completely lost." (pardon our translation) Odd - no mention of CDS speculators having blown up Greece today: instead it is bond selling... How novel. The site also notes that while today's actions "should be a reasonable response and should reduce the spread, if that does not happen then Greece will completely lose control and very soon." This is likely the worst mistake that Greece could have done. By giving bond holders a bogey the target spread will become a self-fulfilling prophecy and will likely be breached in a matter of days. In addition, reports that 450 is a "milestone in the bond market as it represents a level beyond which the state will not be able to borrow."

A roughly-translated version of the article indicates the following key concerns for Greece:

1) In addition to new shorts, today saw the selling by many long-term investors. The shorts are testing the resolve of the EU and IMF to bail out Greece when funding costs become unacceptable.

2) According to well-informed sources, investors have indicated that a spread of 450 bps or higher will kill any interest in holding any more 10 Years leading to a sell off.

Yet what will a disclosure by Greece be without at least a little scapegoating. Sure enough: "While the spread widening was excessive, there is no plan or mechanism to prevent further widening. The hedge funds and U.S. investment banks have won the battle yesterday by forcing long-term investors to sell." Farewell Germany, old friend, hello America, new favorite scapegoater.

Greece is said to have 3-4 weeks in which it does not need to borrow new debt. Also, today's actions has allegedly not precluded Greece from seeking idiot investors out of the US for US denominated bonds. After today's market action we are convinced some mutual fund will be dumb enough to lend to Greece regardless what terms are put on the table or just how bad the Greek funding situation is. In the meantime, we believe Greece needs to roll several short-term bills. With all near-term debt exploding by several hundred points today, the next stress point may not be the 5-7-10 year part of the curve at all, but the ultra-short term side. And when overnight funding is in jeopardy, together with deposit outflows into stable countries, well, that is the end: even US dumb money may have to finally recognize that sooner or later.

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Missing_Link's picture

Nice pun!

Athens is sort of the opposite of Atlas, though.  Instead of propping up the world, the world is propping up it.

ignorant's picture

articles and opinions by banks running boy doesn't really matter

TooBearish's picture

Iceland’s Debt Rating Is Cut by Moody’s, to Negative

mikla's picture

Iceland’s Debt Rating Is Cut by Moody’s, to Negative

I guess that makes sense.  After companies file for bankruptcy, Moody's will cut their rating below AAA.  So, I guess that's the same thing as Moody's waiting until after 93% of Iceland's voters vote "NO" to the IMF eternal indentured servitude to down-rate their debt rating.  (Of course, that was a month ago, so Moody's finally got around to it, huh?)

It's really hard to analyze income and liability streams to compute ability to pay, and come up with a debt rating.  That requires math, pencils, and possibly one of those computerizerator-thingies.  Waiting for bankruptcy filings and explicit sovereign defaults is a *much* easier way to rate institutions.

truont's picture

Revealing the yield tipping point? Calling the Germans "racists"? If I didn't know better, I'd say the Greeks WANT a sovereign debt default!

Shameful's picture

Though really how would a default hurt them.  Sure the gov would not be able to borrow anymore but what is the framework for an EU nation to just say "FU! I'm not going to pay my bills!"

They already are going to have to go austerity, a default would be the best way to do it.  Hell they wouldn't even lose their currency, would just be clearing the slate.

taraxias's picture

There's only one reason why Greece hasn't already defaulted and re-introduced the drachma......pensions.

Telling the Greek public about austerity plans is one thing, telling them their pensions have vanished is another.

Molotov cocktail, anyone?


Shameful's picture

But hear me out.  So you act like a lunatic.  Calling everyone racist, demanding to dictate terms.  Sure you are insane but people are stupid you can spin it that you were trying to get Greece a good deal.  Then of course you don't get the bailout under you insane terms and forced to default as people will not lend to you.

"It wasn't me, it wasn't you!  It was the Germans/French/Americans/Space Aliens!" Now I doubt this is the play.  The leadership is doubtlessly looters so are all for getting a bailout, they just want to get their taste of the action.  I merely point out this scenario because it amuses me, and normally one could not do this because would have their currency absolutely hammered.

dnarby's picture

Could very well be a big game of "chicken".

If they win, they get the loot.

If they lose, they get some rioting to replace football (keeps everyone entertained), and then the gov't goes to an all cash "paygo" system.

Seems surprisingly rational to me, and likely whatever they do will be repeated elsewhere until the whole world is engaged in the new global sport.

seventree's picture

I seriously thought the same thing reading this post. It's like Butch and Sundance after being chased to the cliff ... hold your nose and jump.

"Oh shiiiiiiiit!"

merehuman's picture

Is the USA economy falling apart by accident?

GS accidentally got rich while our country got poor! Coincidentally many other countries share our fate. And nobody saw it coming.

Its as if it was all done on purpose or all countries got stupid at the same time.

Meanwhile  on Blacklistednews i find we are being sprayed with chemtrail mix. Includes fine aluminum particulates. Oh Hurrah, we can breathe the soup. And we allow it !

Its discouraging that we as a public are being sprayed like vegetables, but then we are that now , arent we?

But then , when do we look up and notice?

Oh yea "hi  America, welcome to ausswich".

I think my anger is showing.

A Man without Qualities's picture

There may be a method in their madness - they know they are screwed, but if the breaking point is very messy, other nations may fear collateral damage and do more to help.

The pension system is a lurking horror story, though not sure if this is why they haven't defaulted yet.  There are plenty of people involved in the malinvestment of funds, who would be quite happy to see they whole thing collapse, as it would divert attention from the general pilfering of the funds over the years.

Bigdaddydvo's picture

Dead Man Walking...

jm's picture

Dead man just said "Call" and sometimes nothing is a pretty cool hand.

carbonmutant's picture

Doesn't posting the 450 bps limit make it a target?

Could the Greeks be trying to game the system again by forcing a bailout?

Orly's picture

That's what I was thinking.

Either they have a plan set for some miracle at 500bps and hope it only gets to 450 before they have to whip it out...

or, they are telling the vigilantes, "Here, man, look!  Come and get it." At that point, all hell breaks loose for the Euro.  (Boy, are those days going to be volatile! CHV all day long...)

Either way, these are clearly signs of some desparation on the part of the Greeks, that much is for sure.

aus_punter's picture

so in addition to all their other mistakes the Greek treasury wants to short the dollar by issuing in the 144a market...... priceless !

knukles's picture

"Gonna Loose Control"

WTF think already happened?
Better than Monty Python

Mr.Kowalski's picture

There comes a point where even the IMF can't help, and Greece is rapidly getting there. If there is a serious selloff of the ten year, lights out. D-Day has arrived, Greece sinks into a grinding depression and goes back to the drachma. They really should've learned from Argentina, but alas..

Rick Blaine's picture

Timeo Danaos et dona ferentes.

(Sorry - I couldn't's one of the few things I remember from high school Latin.)

deadparrot's picture

I believe Greece knows they will get the most help (IMF and EU funds) if they default early, so that is their goal. All the drama is just to make it look like the crooked politicians have the country's best interests at heart. "Please re-elect us! We worked so hard for you, but the cruel and nasty Germans/bond traders/etc. had it in for us. We're the real victims!!!!"

MsCreant's picture

Subprime nation on a liar loan. Just walk away, you know, like the rich are already doing. Strategic default. It's all the rage. Revolting even.

Augustus's picture

When they move to the smaller quarters, how will they all fit into Macedonia?

MsCreant's picture

Where is Buzz Saw? Is this what he means when he keeps saying "blow me?"

Nolsgrad's picture

"blow me" is code for I feel the need to post something without value

merehuman's picture

O dear MsCreant. I fear that is the price we all pay for watching TV. For seeking to satisfy every urge. For wanting more when having much. 

I always felt we as a nation would suffer serious karma for allowing Iraq to happen, and still goes on. So we all pay. Except the culprits. 

putbuyer's picture

I am just in awe from today's ZH readings. Absolutely fantastic reporting. I urge everyone to contribute. Wow!

Mr. Obama now wants a VAT tax. Here in CT, they passed a law to tax people (job creators-500k+ earners) to pay more. All those Wall Street guys live here - many are good guys. I hear they will be leaving soon. Oops, just checked - many have left.

Just some musings from shitville. I digress.

DoChenRollingBearing's picture

I heard on the radio today something similar has happened in Maryland, they passed a big tax increase on the Really Really Rich (RRR for Mogambo fans).  And then the RRRs left!  LESS tax money coming in from those greedy millionaires!


Shameful's picture

Yep, which is why I expect capital control and them to loot people as they are forced to leave the US.  I was not trapped in school I would be packing my bags right now.  Hell I would have dropped but my mom pleaded with me to finish law school...I think she wants to keep bragging right.

The more they tighten the more people will head for the door.  And that's what this country needs, a brain drain and capital flight.

DoChenRollingBearing's picture

As you know Shameful, I've kicked around the idea of leaving too (Peru).

But, today at the gun range Mr. Beretta and Mr. Kalashnikov have inspired me to hang on and fight it out.

History does show, however, that when a country institutes an Exit Tax, that is usually the signal to leave.  We now have one.  I have been duly warned.

All of my ancestors have been here in the USA since the mid-1800s or earlier.  I will not let a lefty/crooked system drive me out without a fight.

Unless things get REALLY REALLY BAD!  Then it's the last flight to Lima...       ;-)

Shameful's picture

Well I'm not a fighter.  And I have a youth of listening to old folks from the old country and my grandparents.  Talked to one man who was picked to be sent to Siberia but was two sick to travel, so he was given a 1 day reprieve, the next day the Germans drove the Soviets out.  He took his chances and ran while he could.  My own grandparents fled when tanks showed up, leaving everything they could not carry behind.  My family came as refugees, and now I'm seeing the same system here.  I have no interest in being sent to a dissident camp in Alaska.

You old guys got some fighting spirit.  My dad finally made up his mind that he would rather tough it out in the States so now we are looking at rural land for them and he is stocking up on ammo.  Still need to get them out of hte 401k, looking at Jauary for tax reasons.  For local probably Utah.  My folks are not LDS (nor am I) but Utah is making lot of great laws (pro gun, anti Cap and Tax, grabbing Federal land, anti Obamacare), better climate then Idaho or Montana, and both my mom and I both have LDS friends.  Their church is howling at them to get ready for really bad times, so at least they might be better prepared with stored food in case of a supply line break.

I'm still looking at the door, I can still hear those in my head stories to this day, and it still shakes me up.  Wish people would realize the police state we are walking into.

DoChenRollingBearing's picture

Wow, Shameful, your family history looks amazing.  Consider talking to ALL the old folks and get the info written down (photos too), we finished a 10 year project a few years ago to do our genealogy and family history.  We published 100 copies in hardback book form, 20 of which are still in my closet.

America (our ideals) is not yet dead!  But, the trend is REALLY BAD.  Maybe that can be changed, but probably not, who knows.


Utah is an interesting place (most places, though, are at least somewhat interesting).  The part I went to a bit over a year ago w/ mi esposa peruana was the southern part, Zion & Bryce.  A little cold for my taste, but in my dealings with the locals (Mormons or not?) I was kind of impressed.  Now that you can buy beer (and micro-brews) in Utah, well, that makes the state a legit place to live below the radar...

Do consider looking at leaving law school (as well as traveling to candidate countries) so you can build up your savings and check out the world.  You may find that living under the radar here in America may work for you.

If not, and if you have $50,000 (or more) saved up, AND know Spanish, that there are legitimate options open to you (esp. if you are SINGLE, latinas for good reason like American sensibilities), then you have an option of South America.


That's it for me tonight!  My ice-cold berry flavored vodka (in an ice cold glass) is now helping me in my glide path to a restful sleep.

ZH is my best internet communication re the dangerous times ahead.

Good luck my fellow investors.  Buenas noches!

Shameful's picture

Wished I had more family records.  Found out that used to be a noble family back in the day, and the last name is very unique (Internet says no other matches) and has an interesting meaning.  But like I said they came over without much. 

lol well my dad is a drinker, and happy about that.  To my surprise their cigarette tax is low, also a plus for my dad.

I'm planning on checking out places.  This summer looks like the visit to the homeland with my dad.  I want to go with him since I never picked up the language, my mom made me stop.  Turns out I was 4 and could not speak English but had not problem talking to my grandparents and dad.

I would quit school but my folks are insistent.  For better or worse I am a dutiful son.  But to make up for it I'm working full time as a programmer...meaning that I don't do much other then work, school, and ZH (which bleeds into work and school),

I do have a lot of savings actually, just not 50k.  I was naturally a saver which helped and working again I hold onto a little over 55% of my income for savings.  Though my Spanish skills suck right now, forgot most all of it.  I'm probably better at Mandarin at this point.  Grew up in Phoenix so I really don't have an excuse either.  I know there were some opportunities.  Talked to friend of mine and he knew some guys who got recruited to work in Guadalajara as software developers but that was pre-crash.  Don't know what the IT field looks like south of the border these days.  Hell I'd be more then willing to go to Latin or South America, growing up in Phoenix I saw my share of very attractive Hispanic girls :)  Maybe I should look at Latin and South America again.

Orly's picture

I have an interesting software design for you. marubozoathotmail

delacroix's picture

shameful, look into staking a mining claim. the requirements are simple, the fees are low. you can develop the property. I think its at least 10 acres. i'm pretty sure utah is open to it. no big investment, leaves you mobile.   a little RV encampment, with off grid power, is doable

Privatus's picture

I suggest you give serious consideration to the notion that studying law in a nation that is throwing away its constitutional heritage with both hands is a colossal waste of time and money. If you know how, trade. If you don't, you can learn (start by reading Trend Following by Michael Covel). Escape to a jurisdiction that does not consider you to be its chattel. With zero capital gains tax, Hong Kong and Singapore come to mind.

FrankIvy's picture

As a retired shark, I respectfully disagree.  In a situation with rapidly changing laws, lawyers become even more valuable.  I can barter my legal services for just about anything.  If you're a general practitioner, your services will always have value.

SofaPapa's picture

I may see you in Lima (also have connections there).  But of course, as you know, Peru is tightly bound to the dollar (real estate transactions often conducted in USD, for example). Hmmm...

gilligan's picture

I too have Sth America lined up as an option for a future home.  It has a lot going for it. 

fUny1's picture
We bailed out Goldman and Gang and now they’re back at it again making us poorer at the pump while actively working to destroy what is left of our economy.

If GS, JPM, and the rest of the RICO RACKET is a counter party to any loan or speculative trade or even a hedged trade, every sovereign nation should do what China did and walk away.

RobotTrader's picture

What ever happens the next few days....

Anyone with the balls to go into Greek stocks during the midst of the panic will more than likely see a 300% return in the next 18 months.


RobotTrader's picture

Anyone remember what happened to the MerVal after the 2001 debt blowup?

Budd Fox's picture

Always pragmatic and spot on! Well done Robo....

trav7777's picture

Big game of sovereign-level chicken; this is only the beginning.

The edges are fraying bigtime.  WTF is in it for Greece to have this magical, special "funding" we keep hearing they'll lose?

WTF is the IMF going to do other than shove the debt up their asses?  The pensions are getting cut either way, and austerity is coming.  The only question is do you sell out your national assets to the bankers or do you tell them to EAT IT.

For Greece?  They should say what Iceland said:  fuck you.  Bring the fucking overlevered banks down too.  This inflation pump and dump is as old as the Bank of England itself.  They used the Sterling Bill as a weapon of imperial war for centuries.

The banks lent "Greece" money the banks themselves never had via the innovation of fractional reserve.  So why should they pay it back at all?  Everyone should be asking themselves, if a goldsmith gives you a paper loan and he never had the specie backing it, do you *really* owe his ass repayment?

The terms are "give us your islands" and you other national assets in exchange for the fact that the fucking banks that kited the checks and invented the credit money happen to be sited in OUR countries.  Fuck you Germany, fuck you France, fuck you United States, fuck you Goldman Sachs.

DoChenRollingBearing's picture

I'm getting a, a, what, a meme that DEFAULT may be a word we hear more going forward than the BAILOUT we are all tired of.

I do not owe anything to anyone (ex. each month paying off our credit card bill).

Default does not look so great to us 'creditors'.


OK trav7777, I hear you re taking 'made up' money from corrupt bankers.  But, real men and real nations should pay their just debts.  Greece ran up their debts partyin' on.  And they want Germany to pay for that?

I hope that Greece HAS pissed off the IMF enough so that they (we) do not lend them anything.

So default already (not my phrase)!  Robo may be right, just wait until things look REAL BAD and buy that by-then hated stock market.