Royal Bank of Scotland

All you need to read.

• Default now or default later? (FT)
• Monti warns of tears in Italy's social fabric (Reuters)
• Fear Grows of Greece Leaving Euro (FT)
• Greek Elections Loom as Key Bailout Opponent Defies Unity (Bloomberg)
• Santander, BBVA to Set Aside 4.5 Billion Euros for New Cleanup (BBG) - Thank god they both passed the stress test
• Austerity Blow for Merkel in German State Election (Reuters)
• Apple Founder Wozniak to Buy Facebook Regardless of Price (Bloomberg) - so... another ponzi.
• Dimon Fortress Breached as Push From Hedging to Betting Blows Up (Bloomberg)
• Saudi and Bahrain Expected to Seek Union: Minister (Reuters)
• Obama Pitches Equal Pay to Win Women Even as Charges Drop (BBG)

One month later the purge is over: "Norway’s sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges." Wait, what's that? The Eurozone's political strongarming (think Steve Rattner and GM) was unable to force the world's most powerful sovereign wealth fund into agreeing to what was essentially extortion when bank after bank noted how delighted they are to be bent over and take an 80% writedown on their Greek holdings. Stunning. But at least we now know who will be suing Greece shortly in an attempt to recoup par value of their strong law bonds: grab the popcorn - Norway vs Greece will be quite a spectacle. As for their dump of Irish and Portuguese bonds, no surprise there: fool me once (in perpetuity) shame on me, fool me twice, shame on Dan Loeb... who was buying everything Norway was selling. We wonder who ends up right.

All you need to read.

• Europe focus of global May Day labour protests (BBC)
• Occupy movement's May Day turnout seen as test for its future (Reuters)
• BofA to Cut From Elite Ranks, will fire 2000 (WSJ)
• Man Group Has $1 Billion Outflows; Shares Slide on Cash Concern (Bloomberg)
• Obama Fails to Stem Middle-Class Slide He Blamed on Bush (Bloomberg)
• Berlin insists on eurozone austerity (FT)
• This must be really good for AMZN's 1.5% operating profit margins: Microsoft muscles in on ebooks (FT)
• Ohio Union Fight Shakes Up Race (WSJ)
• How to Lose $7.8 Billion and Still Be Top of the Rich List (WSJ)
• Hollande Seen Bowing to Debt Crisis in Socialists’ Balancing Act (Bloomberg)
• BP profit falls as Gulf spill costs still weigh (Reuters)

European equities are seen making modest gains at the midpoint of the European session; however underperformance is observed in the FTSE 100, with the UK economy falling back into a technical recession with an advanced Q1 GDP reading of -0.2%. Data from the ONS has shown that the UK’s weak construction sector weighed down upon the relative strength in services and manufacturing, pushing the economy into contraction during the first three months of the year. Following the UK GDP release, GBP/USD spiked lower by around 40 pips and the Gilt moved around 30 ticks higher, with GBP remaining weak as the US comes to market. Elsewhere, the Bundesbank held a technically uncovered 30-yr Bund auction, with the German Debt Agency commenting that the results reflect volatile and uncertain market conditions. Following the results, the Bund printed session lows and remains in negative territory. Looking ahead in the session, participants look forward to the FOMC rate decision, and the Fed’s projections release.

Remember this from September 2010? "Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts. “The point is, do you expect these guys to default?” said Harvinder Sian, senior fixed-income strategist at Royal Bank of Scotland Group Plc, in an interview. “Norway has taken the view that they will not. The Greek holdings are particularly interesting because the consensus in the market is that they will at some point restructure or default.” Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity."... Uhm, Big Oops. Needless to say, this stupidity was roundly mocked by Zero Hedge at the time. Yet we can only applaud the fact that unlike other European investors (read primarily Italian banks) which are merely sinking ever deeper into the quicksand by dodecatupling down on pyramid scheme assets, the Norwegian SWF finally "plans to sharply reduce its European exposure while raising investments in emerging markets and Asia-Pacific, the finance ministry said on Friday." While we ridiculed their stupidity in 2010, we applaud Norway's prudence in this case, as unlike other insolvent European entities, the crude-rich country is not falling for the latest round of central planning bullshit, and is finally acting as a fiduciary agent. "We're reducing our European exposure because we see that economic development in the global economy is changing and this should also be reflected in our investment strategy," Johnsen said. "Most likely we'll have to sell some assets in Europe." Remember: in game theory he who defects first, defects best. We expect to see many more funds openly declaring they will commence dumping European assets, all of which are buoyed 100% artificially by the ECB, and US taxpayers, shortly.

• Greece's Fringe Parties Surge Amid Bailout Ire (WSJ)
• ECB fails to stem reduction in lending (FT)
• More Twists for Spanish Banks (WSJ)
• Banks use ECB cash to buy bonds, lend less to firms (IFR)
• UK still long way off pre-crisis growth – King (Reuters)
• Dublin confident of ECB deal to defer payment (FT)
• Goldman's European derivatives revenue soars (Reuters)
• Japan Faces Tax Battle as DPJ Finishes Plan on Sales Levy (Bloomberg)
• Insurance Mandate Splits US Court (FT)

All you need to read and some more.

As we head into the US open, European cash equities are seen in positive territory with strong performance observed earlier in the session from the FTSE MIB. This follows reports from the Italian press regarding commentary from the Chinese President Hu Jintao who promised to encourage Chinese industry to look towards Italy with confidence, in a conversation with the Italian PM Monti on the sidelines of the nuclear safety summit in Seoul. Markets have also been reacting to an article from Der Spiegel, citing economists who have warned that the German central bank could be facing hidden liabilities of up to EUR 500bln should there be a break up in the Eurozone. This has prompted some risk-averse flows into the Bund which has seen fluctuating trade so far in the session but remains in positive territory as North America comes to market. In individual equities news, following overnight reports from Abu Dhabi concerning buying a stake in RBS, company shares were seen up 6%. Source comments from earlier in the session regarding the sale speculated that the stake could be up to a third of RBS. Looking ahead in the session, the market awaits US Consumer Confidence data due at 1500BST.

All you need to read.

All you need to read.

• Obama, Cameron discussed tapping oil reserves (Reuters)
• Greek Bonds Signal $2.6 Billion Payout on Credit-Default Swaps (Bloomberg)
• China leader's ouster roils succession plans (Reuters)
• China’s Foreign Direct Investment Falls for Fourth Month (Bloomberg)
• Greek Restructuring Delay Helps Banks as Risks Shift (Bloomberg)
• Concerns Rise Over Eurozone Fiscal Treaty (FT)
• Home default notices rise in February: RealtyTrac (Reuters)
• China PBOC Drains Net CNY57 Bln (WSJ)

All you need to read.

The biggest sovereign debt restructuring in history is now, well, history. The headlines are finally come in:

• GREECE ISSUES STATEMENT ON DEBT SWAP
• GREECE COMPLETES DEBT SWAP
• GREECE SAYS EU172 BLN OF BONDS TENDERED IN SWAP
• GREECE GETS TENDERS, CONSENTS FROM HOLDERS OF 85.8%
• GREECE SAYS 69% OF NON-GREEK LAW BONDHOLDERS PARTICIPATED

We learn that €152 of the €177 billion in Greek law bonds have tendered, which is 85.8%. This means that €25 billion in Greek law bonds have not - these are the hedge funds that could not be Steven Rattnered into participating, and will now sue Greece for par recoveries.This is also the number that ISDA will look at today to determine if, in conjunction with the CAC, means a credit event has occurred. And yes, the CACs are coming, as is the Credit Event finding:

• GREECE SAYS WILL AMEND TERMS OF GREEK LAW BONDS FOR ALL HOLDERS