Let The EU's Risk Juggling Begin - Greece Bund Spreads Tighter As Portugal Risk Jumps By 12%
Never a boring day for Joaquin Almunia. Over the past two weeks, the commissioner has been busy trying to persuade anyone who is willing to listen that not only would Greece not be bailed out, not only would the country somehow reconcile its 140%+ Debt/GDP ratio and record budget deficit in order without a civil war, not only are various €40 billion GGB certificates popping up all over the price irrelevant in the grand scheme of things, but that the EMU is actually a viable concept, long after anyone who does not believe in the tooth fairy realize that it is only a matter of time before fallout in the periphery tears the Union apart. And highlighting the amount of tragicomedy in Europe's "connected vessels" alchemy-risk experiment is the symbiosis among PIIGS risk: indeed, as Greece Bund spreads have tightened by 10 bps to 343 bps, those of Portugal have widened by a much greater proportional level, and are now 15bps wider at 144 bps. Europe is now one big, cracking dam, holding back a toxic surge of mismarked securities, and a scurrying Almunia is using each and every available finger to plug the PIIGS holes. We wish him all the luck in the world.