3 Little Things That Aren't So Little

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors

The EFSF pulling a 3 billion bond sale due to market conditions is pretty bad. These bonds are cleaner and safer than the binary default options the EFSF plans to be selling in the future. Shouldn't the EFSF generally be expecting to issue in choppy market conditions? It's like a fireman showing up at a house and refusing to fight the fire because, ah, um, ah that house is on fire and could be dangerous. Regling should spend some time focusing on the blocking and tackling of the EFSF. So far markets (equities in particular) are doing a good job of ignoring this, but not being able to sell at a decent rate, 3 billion of straight debt, doesn't bode well for selling a trillion of complex debt.

IIF is still working on the haircut - heck they even called Greece. It is now almost a week since the grand plan and all we know about the IIF deal is that it will be a 50% NPV reduction and help Greece's debt to GDP by 2020.  How about for every 100 euro of Greek debt you get 25 euro of some new Greek 4% coupon 5 year bond and 25 euro of a new 4.5% Greek 10 year bond. That is a real haircut and is easy. At first I thought the IIF was tricking Merkozy but I now think they were in on the joke - just Greece and the citizens and Geithner fell for haircut headlines.

If Greece and China have any side meetings I would view that as very bad for the grand plan as they are most likely arranging post default financing. China and Greece could both do well in a Chinese backed post default Greece. I would not take meeting between china and Greece as euro positive.