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Most Recent Batch Of Greek Bonds Already Trading At Post-Break Lows, Investors Underwater
Somehow we don't think that the evil hedge funds that were excluded from participating in Greece's most recent round of issuance are spending their nights weeping over this snub. The 6.25% bonds maturing in 2020, which priced at 98.942 are now trading at their lows of 98.36, with a corresponding yield of almost 6.5%, compared to the issuance yield of 6.35%. Due to the perception of yield "stickiness" in the eyes of investors, and as any new issuance will likely have to contend with the stigmata of resulting in underwater status within a few weeks of the break, we fully expect the next round cash coupon to be about 6.5%. Unfortunately, even as Greece does all it can to prevent over 10% of its GDP being paid out to foreign lenders in the form of bond interest, it will have no choice but to price the next bond issue in the mid 6% range, making its economic predicament increasingly more dire. And the worst thing is Greece is running out of both time and options, a ticking time bomb very much appreciated by savvy bond investors who can tell the underwriters during interest inquiry that anything below a 6.5% yield is a non-starter.
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Poor Greece is left to pick petals off a daisy while mumbling, "EMU loves me," picks another petal, "EMU loves me not."
Note to Greece: Unless you have a dowry, you'll make a perfect whore.
But the Greeks NEED to borrow money at the same rate as other more credit worthy countries! It's not FAIR; why can't they have a printing press too?
I could picture S&P analysts scrambling on their phones ready to place Greece back on Credit Watch with NEG IMPL
This is a mushroom cloud waiting to happen.
Investors = alligator arms - for whatever they bring to market.
As the optional views of the soon to be gain in clarity. What I am wondering is whose requirements does it serve to force Greece into the waiting arms of the IMF (for at least 15bn of an estimated 55bn of capital requirements until years end) and fracture the EU into a broad version of California's Nortenos & Surenos?
It serves the interest of the USD, reinforcing its reserve currency status
WARNING SIGN: http://williambanzai7.blogspot.com/2010/03/blog-post_9474.html#comments
Anyone considering buying Cali bonds should look at the Greek ones for some idea of what the future will hold.
Anybody venture to post a "best estimate" of what month Greece's procrastination will hit the brick wall?
Mid May. By then the jabber jawing and their debt will finally reach a boiling point... though these scam artists could go as long as August.
I say it will happen late April. Nobody wants to save them and the ones that do don't trust the Greek govt.
This is what the beginning of a depression looks like. There is no exit for Greece, which will see GDP fall away while service costs increase. Like the rest of the OECD, Greece is stuck in 1931.
The IMF can only front 15b euros which will not help Greece very much.
Jim Roger's opinion in favor of a bailout is pretty much irrelevant since any bailout is now probably too late to avert a compounding debt spiral in Greece.
The Germans are acting like asses with nothing positive for them, either. German banks with Greek exposure will have to be bailed out by the government and that will cost a lot more than subsidizing Greek debt service.
The Greeks ought to float the drachma alongside the euro and give it an inflationary term; a 'Disappearing Drachma' that must be spent within a reasonably short time frame. That way the Greek citizens will have some sort of (local) commerce and retain some sort of independence at the same time while the Ebeneezer Scrooge wing of the Eurozone can go back to hoping for a return to bullion.
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