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Greek Curve Pancakes, 6 Month GGB Approaches 7%
The curve below indicates that bond investors now believe that Greece will likely default in under 6 months, or at least the EMU will realize that Greece is a lost cause and cut it off, despite all rhetoric to the opposite. Actually, with the 3 month trading at a mindblowing 4%+, which we are fairly confident is a record for any country, let alone a EU and EMU member, one can claim that the country will not see July in its current political form. The 3M-6M spread of nearly 300 bps is an all time record for a developed country. Past the 6M point, you can see all the way to the Pacific. Note the curve shift from April 2009, when the 3M was trading at just over 1%. At this point the only question is whether the 3 Month will join the other points on the curve in the 7% ballpark.
We believe the sequence of next steps is now as follows:
1) Failed auction for Greece
2) Euro drops to sub $1.30
3) EU effectively isolates Greece and takes it out of the EMU in practice if not in theory
4) Euro tumbles to $1.15
5) Bernanke realizes the implications of a surging dollar for the US trade balance, and reinstates QE, cranks up the printing presses, sending the dollar plunging and the euro surging back to the $1.40 level
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More QE?!
I am gonna cry...
Gonna dump my few USD savings and get a sound currency like Chilean Pesos.
Pesos? Nah. Gold Bitches!*
*Propeganda to the contrary notwithstanding.
Ok... Ok... You convinced me.
Gona get some "Gold Bitches"*
*© by Quintus
Bummer. I was just dusting off my passport till I got to #5. Still, you're saying there's a window there...early fall is the sweet spot for an American in Paris?
Instant classic.
No shit. I hope someday I find out who writes all this stuff.
Great projections and perhaps very possible however why would anyone believe such an event could take place these days given all the power is in the hands of Gov't. This is how jaded one could get.
so does this mean BUY BUY BUY BUY
Actually for Greece I think it means... BYE-BYE!
That's over 3 additional bps of yield being demanded for every day of additional term. To paraphrase Hunter Thompson, they're like a farmer with cancer trying to borrow money on next year's crop.
Copy the chart folks, because when the next PIIG goes, it will follow the same playbook. Martin Armstrong has predicted developed country sovereign defaults in 2016. This is the appetizer as the countries in the "ring of fire" will eventually met their fate. More QE just shows investors the desparation of the situation to the point of diminishing returns.
Don't forget - 10 yr auction this afternoon. Have to generate some demand on the long end.
Just setting people up for the kill so the next stick-save can get us to Dow 12K.
Looking good here.....Santelli may give it an "A"!
How much more of this Euro abuse are the Germans and the rest of the EU going to tolerate?
Lots and lots. We aren't even near parity, which they tolerated just fine.
European vacations for all! Has Lufthansa started daytime TV commercials in the U.S. yet? Those German castles always look so cool.
Honestly, I'm all for more QE if this go-around it actually reaches consumers and aren't stuck straight into some banker's wallet.
How about monetizing credit card debt or issuing FRN Stimulus Checks? How about actually being a lender and lending directly to small businesses? Give the SBA a $100 billion credit line (about 1% of what's been extended to banks) and have them directly process and underwrite loans.
Don't be silly. Direct lending and free money is just inflationary. But, if we have a fiat system, I guess I'd rather get the inflationary boost first! But c'mon! How about real savings in a real store of value and real capital investment based on savings, not gov't credit! We'll get there one way or another as the unsustainable becomes unsustained...
So say Greece defaults, and most of 300+B will not be repaid. Shouldn't that be the cause for EUR to strengthen against other currencies as
1. There will be asset liquidation to raise cash.
2. Debt going bad and defaulting is deflationary, thus money supply would be diminished.
Amazing information here about the economic situation in Greece and other parts in Europe. The news about the current economy are quite bad, and it make me take natural medicine, bee pollen supplements and go to numerous doctors often because of all this stress, so I hope that the world economy will get on the right track.