Greek Credit Risk Spikes, Default Probability Tops 70%

Tyler Durden's picture

Greek default risk has surged in recent days and today as it becomes clear what Syriza expects from Europe, short-term CDS are at post-crisis highs with 5Y CDS implying a 76% probability of default (based on standard recovery assumptions - which may be a little high in this case). Given the domestic bank dominance in the buying of domestic government debt, Greek banks are getting hammered as everyone's favorite hedge fund trade is an utter bloodbath. Greek stocks overall are down and GGBs are tumbling once again - back at 16 month lows (given back all the ECBQE hope bounce). Perhaps not surprising moves, given new Greek Finance Minister Yanis Varoufakis reality-exposing comments yesterday, "the problem with the bailout is that it wasn’t really a bailout... it was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which destroyed our social economy."


Greek Default Risk is spiking...


And Greek bonds are tracking that risk...


Greek stocks are collapsing...


led by an almost halving in banks...


We leave it to new Greek Finance Minister Yanis Varoufakis to conclude:

“The problem with the bailout is that it wasn’t really a bailout,” Varoufakis, 53, said in a Bloomberg Television interview on Jan 26.


“It was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which not only destroyed our social economy but also showed that the cost of our so-called bailout for the average German, the average Italian, the average Slovak was maximized.”

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ukspreads's picture

Not to worry, there will soon be a revision for that - Rule 102339

NoDebt's picture

Who still buys CDSs?  They KNOW they're never going to pay up.  Nothing will ever be deemed a "credit event".  What's the point?  Are they legally required or something?  Do they just do it so their risk profile "technically" looks OK on paper, even though it's not?

Silver Short Seller's picture
Silver Short Seller (not verified) NoDebt Jan 28, 2015 10:34 AM

Argentina had a credit event in Aug 2014:

Lots of banks and instos still use it to hedge.


Manthong's picture

Greek Credit Risk,,



What makes anyone think there is risk in loaning money to Greece?

It's not like they have ever defaulted on anything in the past.

Publicus's picture

The Drachma comes, to destroy the Euro Fascist.

Manthong's picture

How do you risk weight a sure thing in a Ponzi scheme?

HardlyZero's picture

Grecian FormulaTM won't cut it...needs a full extraction and then implant plugs or a new rug ?

Save_America1st's picture

WHAT???  WTF???  You mean to tell us that the new Commies in charge of Greece-istan haven't instilled any hopium into the markets???


Sounds raaaaayciss to me. 


Somebody better let Germany know what's going on over there.

Oh wait....

prmths2's picture

Does the Grecian Formula still include hairdressers being eligible for retirement and pension at 50 due to working in a business that involves exposure to hazardous chemicals?

EscapeKey's picture

The Greek credit event was deemed not to be a credit event, until the banks decided that their exposure was minimal.

The lesson is that it's the banks who decide whether it's a credit event, not common sense. If it's in their financial interest to deem it "not a credit event", then that's exactly what they will. It's another case of heads I win, tails you lose.

Ghordius's picture

exactly. packaging and repackaging in a way that risk looks immaterial is a wondrous use of CDSs. plenty of "vehicles" of banks are done this way, and hedgefunds also like CDSs because they make them feel they have tamed some of the uglier parts of their risk-profiles

in short, they are only there in order to cement the dominance of the megabanks, at the expense... of everybody else on this planet

take them away, and you have broken up megabanks. now, of course, I have to channel Jamie Dimon: "The US profits from the dominance of JPM..."

williambanzai7's picture

Lloyd Blankfein: We were fully hedged.

Atomizer's picture

He stated that during Davos interviews. In a riddled way. I blasted him several days back. Fruition prevails. 

Arius's picture

as of this morning, Greece exit is priced in ...


lets move on ....what else?

Headbanger's picture

You never cease to amaze us...

Arius's picture

i meant it as a positive comment ... let's move on to fix the problems.

Obama LaForge's picture

Zerohedgers are starting to capitulate on doomsday. That means it's imminent.

Arius's picture

if i had to guess many must have capitulated or at least be insolvent long time ago ... although, people might still be in denial stage, and still trying to prove they are right ... which reminds me of the old saying about the broken clock being right twice a day.

LawsofPhysics's picture

Defaults you say?  LOL!!  Please, nobody is allowed to default anymore.

on another note..

I find it odd that the "captains of finance" are all so scared all of a sudden.  Sitting on top of mountains of free money and wealth thanks to years and years of QE and ZIRP, yet they won't deploy any of it.

So much for the "job creators" and "innovators" of the world.  Here's to hoping they taste like chicken I guess.

NoDebt's picture

No job creators or innovators were ever given free money.  They gave it to banks instead.

LawsofPhysics's picture

Banks AND venture capital groups and financiers in general, yes.  Exactly my point the same fuckers that say don't tax me bro, I am a "job creator".

Possible Impact's picture

Is it a default if they simply repudiate?


Ghordius's picture

perhaps, and perhaps not, depending on that funny board. but the question here is a different one

three quarters of the debt of Greece is not on the markets at all (and does not pay interest until 2023)

the remaining quarter only is "subject" to those CDSs. so what is the "value" of what CDS prices "say"?

it's time we bring back the common sense laws on derivatives before 1999: ban them. they are utterly worthless, except for the casino financial economy punters and the complex packages they do with them, mostly in order to hide debt or make balance sheets look wonderful

elegance's picture

Come on Varoufuckis, default already. Do another Argentina, cause your country sure as fuck ain't no Iceland. 

11b40's picture

Russia has no plans to bail out Argentina.  Greece, well, let's wait & see.

elegance's picture

With oil going to sub $30 Russia itself will need bailout soon. 

11b40's picture

Maybe, maybe not.

Greece may not be Iceland, but it isn't Argentina, either.  Just look at a map and tell me which has any real strategic value.....and Russia is not the only potential to assist the Greeks with their problems.  China could cause all kinds of 'issues' there for the EU if so inclined.

It's a big chess board with a lot of players and a lot of moves yet to come.

williambanzai7's picture

"the problem with the bailout is that it wasn’t really a bailout... it was an extend and pretend, it was a vicious cycle, a debt-deflationary trap, which destroyed our social economy."

Just imagine if Lloyd Blankfein's bailout looked like this.

HardlyZero's picture

Lloyd doesn't use Grecian FormulaTM....he's a chrome dome.

winflation's picture

Can you imagine if this Varoufakis guy ran the Fed...

skbull44's picture

It's got to be almost time for a false flag, Russian/ISIS terrorist attack in Greece...

franzpick's picture

led by an almost halving in banks...

Guess where else the banks are leading the way down?:

Hulk's picture

LOL, to get credit risk to spike nowadays one has to yell from the tower "I am Not going to pay, I am not going to pay" !!!

Atomizer's picture

Hiding the decline.

Don't forget to download MacKeeper. You don't want your iWatch to inadvertently change time zones. You might miss an important scheduled appointment with your parole officer  


oudinot's picture

I don't blame the new Greek government ; the IMF and the ECB loan them money so they can pay back German and French banks from previous loans, fire 1/2 of public employees,be directed  sell their best national assets to bankster vultures whjile  watch the peple economically disintegrate.

Do an Iceland and tell the mooches to Fuck Off and Die!!!!!

29.5 hours's picture



The question of questions remains the same: the health of the banks which originally leant to the Greek government.

We know that the overwhelming bulk of the credits used to "save Greece" were just transfers to the largest European (and some American and Japanese) banks. The Greek people got nothing -- and the Greek government got a pittance, which they surely promptly spent on themselves and cronies. Instead, the Greek people ended up with austerity to the next generation and beyond.

Will this new government change the relation of forces for the Greek people? Will this government speak on their behalf and organize them to deal honestly with the crisis?

Nothing I have seen so far leads to optimism. This "socialist" government seems to be another group of play actors.



Atomizer's picture

The dipshits will declare the need for another bank stress test. 

Pumpkin's picture

Probability Tops 70%


You couldn't beat the optimism out of these idiots with a baseball bat.

FrankieGoesToHollywood's picture

I will not cheer the activities in Greece.  Rather I will observe how, when situations become so dire, the electorate chooses a communist due to hope they will deliver better times.  As time move forward, as the communists default (electorate cheers) and in order to maintain stability, take over major private enterprise (electorate cheers).  Once in control of industry I will watch how choices are reduced creativity stiffled in order to "give everyone equal opportunity".  (electorate shrugs).

lakecity55's picture

It sure would have been better for Greece to choose common-sense leadership with a hard-nose towards Markets instead of Communists.

While throwing off the ECB leeches, they will probably not fix their domestic overspendng.

NotApplicable's picture

If common sense were allowed, it wouldn't be called politics.

11b40's picture

As opposed to eternal debt servitude to central bankers, right?

FrankieGoesToHollywood's picture

never said that.  I am sure there are more than two choices.  Unfortunatly in open loop systems, people overshoot the ideal solution.

11b40's picture

I agree with that, but every 'solution' so far has left the country further in the hole. 

The alternative that the ECU/IMF do not want is edging closer - a 3rd party bailout from either Russia or China, or a mix of both.  Greece occupies a very valuable strategic territory, and their debt problems in the overall scheme of things are easily manageable for Chinese 'investments', for instance, or in exchange for Russian military ports.

Western leadership (and I use the word with contempt) seems to be extremely myopic and hubristic, a mixture that usually leads to bad consequences.

StandardDeviant's picture

A false alternative.  While some sort of debt default seems inevitable, that doesn't mean they need to make matters worse by increasing the public payroll, nationalising (or stopping privatisation of) companies, and so on, none of which they can afford in any case.

11b40's picture

Go back and revisit how Greece was allowed to become a Euro country in the first place.  Here is a hint - another example of bankster fraud brought to you by our good friends at the Squid.  Now, they are ready to strip mine an impoverished Greece set up for plunder.

Silver Bullet's picture

As a mere spectator, I hope Tsipras pulls Greece out of the Euro. This will give the rest of the world a real world example of what happens when you press the rest button in 2015. Because up to now, it's only theory.

falak pema's picture

Lady Lagarde represents the creditors and feeds the beast of bankstas.

It is of no concern to her that both the sheeple of bailed out and bailer out countries both suffer in the process.

Its a huge scam, a Madoffian sucking sound, to transfer wealth from the middle class to the Davos crowd  to which Lady Lagarde belongs for her marching orders.

And Mutti is sucked into this spiral since 2008 as she got elected with the help of the same Oligarchs who parachuted Barroso to head the EU Commission; like the 89th airborne on D Day.

It is exceedingly clear that Mutti's Germany has no CLUE how to extirpate itself from the ECB helicopter -- which basically feeds the banks, not the middle class entrepreneur-- nor from the military vise of the US/Russian stand-off in Ukraine. 

Double whammy for Germany and EU. Wait until the cookie crumbles under the mysterious forces of impending chaos.

Yanis V is right, this shit has to stop. There are no Nazis out there in the real world except those religious fanatics dressed up as "terrorists", created by our own allies whose bosses, if anything, play at being the financial nazis sitting in DC/WS.

Our first world sows what it has reaped in the ongoing tug of war for control of polluted king oil's monopoly.