Greece

Greece has finally come to market with a 10 year bond, catching the very end of the offering window, through a €5 billion bond issue, which according to Petros Christodoulou-spread rumors, is nearly 3 times oversubscribed. Underwriters Barclays, HSBC, NBG, Nomura and Piraeus Bank are alleged to have collected nearly €14.5 billion in bids. We wonder how much of that is merely basis trades being fillled on the cash side. "We are very happy with the bid because the re-entry into the market is always challenging. It went very well," Petros told Dow Jones Newswires. Greece has cut price guidance on the bond from 310 bps over mid-swaps to 300 bps, with books closing at 11am GMT. Pricing is expected later today. Assuming this bond offering closes successfully, Greece will have enough money to last it for at least 30 days, joining such other illustrious countries as the United States, in living bond auction to bond auction.

The only thing worse than a no news day, is a day like today, when every piece of news/rumor contradicts the prior one. An hour ago Moody's was praising new Greek initiatives to increase the retirement age to 100, decrease wages by 100% and mortgage the Acropolis. This was promptly followed up by the just released announcement, in which Moody's said it has put five Greek banks, most notably among them the National Bank of Greece (which as we first disclosed is still ashamed of disclosing the Titlos prospectus on its website). Should the NBG's, which currently has an A2 sub debt rating, be notched lower, we expect some interesting collateral calls to occur in the very near future (see our analysis on the Titlos SPV situation). Of course, we are not sure how an independent downgrade of the NBG would occur without Greece itself being downgraded in tandem. Which fits perfectly with the ever increasing confused chatter emanating out of all parties doing whatever they can to bail out Greece, without actually bailing it out.

Goldman's chief Euro strategist Erik Nielsen is out with another note, this time one of praise and wild-eyed adoration for the increasing desperation in Greek polemics (note, not actions: those tend to be more of the semi-violent police clashing, people striking variety). Well, duh, of course Greece will promise it will take out a second-lien on the Parthenon (and a first on the Acropolis): the country will be out of money in two weeks for Pete's sake! Aside from the pandering desire to be next in line as lead underwriter on the next Greek multi-billion swap (and receive fees, millions of dollars in juicy fees), Nielsen does provide a good narrative that ties in the Greek bail out, and the recent anger against CDS "Speculators" who will at the end of the day be the validation for why Europe will have "no choice" but to bail out Greece, as it is solely through their vile scheming that GGBs are trading so much lower compared to where they should be trading. Because taking a cue straight from the US market, none of this bankruptcy stuff is relevant at all when dealing with capital markets.

From Dow Jones: Greek PM Says If EU Doesn't Help Greece It May Go To IMF. Also, this is the definition of a complete lack of leverage: Greek Cabinet Member: PM Says Greece Needs EU To Show Its Support Now, and that the Time for EU Help Has Arrived. And screw strikes - here comes the civil war:

• Greece to cut public sector salary benefits by 30%,
• Cuts wages across the board.
• Establish emergency tax of 1% for salaries over €100,000
• Freeze public sector hiring in 2010, and in 2011 one new job will be filled for every 5 retirements

And all this is followed by a cold water throwing Angela Merkel who just said that the Friday meeting will be purely on the "State of things" and no aid to Greece will be promised.

As always, pure anarchy - should be enough for some 1-2% worth in computerized S&P buying on a few hundred ES blocks.

Has it been 15 minutes? Yep - here's the latest from Dow Jones: Greece risks bankruptcy if it doesn't take radical extra measures to fix its finances, Prime Minister George Papandreou warned Tuesday, saying the country was in a "wartime situation." We are confident the "wartime" reference is purely a metaphor cause Turkey has been very quiet lately. And here is how you can help.

It has been at least 15 minutes without a rumor, report, or actual development on Greece. So here is one: Market News reports that a senior member of Chancellor Palpatine, er, Angela Merkel's CDU/CSU-FDP government coalition has told the news agency that "Greece cannot count on financial help from the European Union and has to solve its budget problems on its own."

It is not often that one finds smoking gun reports which refute all claims, such as those by EuroStat and Angela Merkel, in which the offended parties plead ignorance of the fiscal inferno raging around them, kindled by lies, deceit, and blatant mutually-endorsed fraud, and instead, now facing themselves in the spotlight of public fury, put the blame solely on related party participants, such as, in a recent case, Greece and Goldman Sachs. Yet a 2001 report prepared by Gustavo Piga, in collaboration with the Council on Foreign Relations and the International Securities Market Association, not only fits that particular smoking gun description, but the report itself was damning enough of another country, a country which used precisely the same off-market swap arrangement to end up with an interest expense of LIBOR minus 16.77% (in essence the counteparty was paying Italy 16.77% of notional each year as a function of the swap mechanics), in that long ago year of 1995. The country - Italy (for confidentiality reasons referred to in the report as Country M), was at the time panned as the Enron of the European Union due to precisely this kind of off-balance sheet arrangement by the Counsel of Foreign Relations. The counterparty bank: unknown (at least in theory, since the swap was highly confidential, and was referred to as Counterpart N), but considering the critical similarities in the structuring of the swap contract to that used by Greece in 2001, and that ISMA cancelled Piga's press conference discussing his findings out of fear for the academic's life, we can easily venture some guesses as to which banks value their recurring counterparty arrangements more than human life.

I would suggest that the long-term interests of the Eurozone are better served by denying Greece a bailout, even if it means that Greece withdraws from the Eurozone and, in the process, weakens the euro significantly, say, from the recent $1.35 – 1.36 level to
$1.20. A weaker euro would actually be quite popular in export-oriented Germany, and be generally welcomed in the entire Eurozone as enhancing the competitiveness of the region. Also, inflation is currently well below the ECB’s preferred level of around 2% allowing room for any inflationary consequences of a euro depreciation to be manageable. Second, absence of a Greek bailout would lower the
risk of moral hazard inherent in Portugal and / or Spain following in the same path if Greece does receive a bailout. Despite the temporary weakening of the euro that might result from, say, Greece’s departure from the Eurozone, the emphasis on fiscal health
would have a beneficial impact on the medium-term course of Eurozone inflation and of the euro itself. - TCW

Those banana-hugging Germans strike back, and by doing so, throw the rotten apple of the imminent Greek collapse straight into America's back yard: in today's edition of Handelsblatt, German politicians have said that only the International Monetary Fund is the right institution to save Greece from going bankrupt. While the increasingly irrelevant Greek rumor-spreader has been very busy over the past few days, getting Greek newspaper Ta Nea to announce that now Caisse des Depots has entered the KfW bailout syndicate, in an interview with German TV station ARD, Merkel said that not only is this yet more gibberish but that there is no legal basis for any of the rumored actions. So what will happen to Greece? Well, if former ECB Chief economist Otmar Issing has his way, Greece's dirty laundry will end up being washed by American taxpayers, because you see Greece is just as much a member of the IMF as it is of the EU, or so the Germans claim.

"It's not something that is 10 years away. It affects the markets currently," he told the House Financial Services Committee. "It is possible that bond markets will become worried about the sustainability [of yearly deficits over $1 trillion], and we may find ourselves facing higher interest rates even today."

Have we just crossed the historic Rubicon when a photoshopped classical statue is about to lead to a collapse in a monetary and customs union, and possibly something a tad more serious? Also, is the KFW bailout rumor too little too late? It appears the Greeks are two minutes away from saying "take you bailout and shove it." The reason: The Focus cover which shows a status of Venus de Milo flipping off the Greeks, who were characterized as the "cheats of the eurozone." After recent Greek media outbursts have recalled the Nazi wartime occupation of the country, as well as demands for WWII reparations, today's action by the Federation of Greek Consumers, calling for a boycott of products, made by "banana-eating" Germans, is a direct response to the airbrushed statue of Venus expressing the communal German sentiment. Oh, and that whole KfW rumor? Don't buy it: "[KfW bond purchasing] considerations have been presented because it's seen as the only way of avoiding accusations of...direct aid," the lawmaker said. But he stressed that no decisions have yet been taken. I.e., More posturing.

Moody's, whose inability to downgrade Greece has made the late night credit trader comedy circuit, as a dump below A would be the formal start of the real-deal Greek funding crisis, has decided to project its downgrade insecurities on Europe punching bag Iceland instead: just what the brankrupt country needs. In a press release earlier the Moody's experts note "Moody's Investors Service said today that the breakdown in the talks between the governments of Iceland, the United Kingdom and Netherlands to resolve the Icesave dispute puts the Icelandic government's Baa3 rating under downward pressure." In the meantime, we are curious what the new index of Financial Conditions, created by such objective individuals as Goldman's Hatzius, DB's Hooper, ex-FRBNY's "Napoelon" Mishkin, NYU's Kermit Schoenholtz and Princeton's Mark Watson, says about availability of credit in Greece.

Germany is considering buying Greek bonds through state-owned lender KfW Group, German lawmakers said today. KfW is preparing measures that are part of a European plan to grant Greece as much as 25 billion euros ($34 billion) in aid should the need arise, said four lawmakers, who spoke on the condition of anonymity because the information is confidential....Assistance to Greece should flow through the International Monetary Fund, the most suitable body to offer financial help that’s tied to stringent conditions, the lawmaker said. The IMF should provide more than technical assistance, the lawmaker said, citing aid given to Hungary and Baltic states as examples.

As the roadshow was initially scheduled for the second half of February, this implies that the Greek bond offering is, for now, history. Furthermore, no new roadshow data has been set. It is unknown whether this is due to the massive deterioration in Greek financial perceptions over the past week, or if because the government has managed to arrange a private loan with Deutsche Bank (which hopefully does not have a downgrade put trigger as that would be the shortest loan in history).

Greek spreads were about 10 bps tighter earlier after rumors that Deutsche Bank CEO Ackermann's meeting with Greek officials was to set the tone for a €15 billion DB loan to Greece. Even as Eurostat was analyzing the Greek swap info, and Greece announced slightly better than expected January budget data, the country was still forced to delay its bond offering as expected by Zero Hedge, despite consistent disinformation rumors spread by the Greek ministry otherwise.