So Much For That Greek Containment: CDS, Bund Spread Back At Record Wides
Remember how that "massively" oversubscribed Greek bond deal (at HY spreads) was supposed to bring peace and prosperity to the gyro makers? Well, oops... Today, the spread between Greek 10 Years and Bunds just hit a record wide of 406 bps, as CDS also hit another all time wide at 370 bps. The chart below shows how Bund spread has moved over time: basically the funding problem in Greece just got worse despite of the bond sale, and now the Greek finance ministry has entered desperation mode.
Just how desperate? The latest development which is precipitating this move (which of course involved Goldman Sachs), is the rumor that Greece has hired GS to sell €25 billion of Greek bonds to... Beijing. Welcome to the new lender of last resort: China has just become the world's Federal Reserve. Although we shall see just how successful this is. And, as expected, Greece vehemently denies anything is happening: "We categorically deny that there is any direct or indirect agreement between the Greek government and Chinese or other investment funds to purchase debt, Greek bonds or Greek assets," the finance ministry said in a statement. "Likewise, we categorically deny that any mandate has been given to an investment bank to negotiate these issued on behalf of the Greek government," the statement added. So yes, this basically proves that Goldman is in active negotiations, vying for a place on the right hand side of the Chinese Bernanke replacement.
Of course, local color is always much appreciated, especially for the humor content. Reports Dow Jones:
"All this widening in the spreads is baloney," said a trader at a Greek bank. "The market is just trying to find an excuse to push the spread wider." He added that news that Greece was planning a new 10-year bond issue in the next two to four weeks, had also led to selling pressure on the 10-year Greek government bond.
Yes, markets just try to find an excuse to push spreads wider when the trend over the past 9 months has been one long painful grind tighter. Better luck next time Greek bank trader.