Greek 1 Year Bond = 1006%

Tyler Durden's picture


Another day, another reminder that all those who listened to "pundit" calls for loading up on Greek 1 year bonds which hit 100% for the first time ever in September of last year, are now broke to quite broke. As of this morning the Greek 1 Year Bond has just passed 1000% and was down to just 20.5 in cash terms, further making the case for a Greek redefault in just over a year, as pre-petition bondholders make it abundanatly clear they don't expect to collect much more than one cash coupon in the "fresh start" country. In other news, Greek CDS just hit a new all time high of 77 pts, and the basis package is at a record of 98.5. It appears that the IIF fearmongering has not stopped all those who wish to have a basis package going into Thursday from doing just that (because for the cheap seats, CDS prices go up when there are more buyers than sellers).

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Mon, 03/05/2012 - 10:55 | 2223789 DeadFred
DeadFred's picture

I remember the good ole days when it was only 200%. I said to myself it looks like a good buy! LOL

Mon, 03/05/2012 - 11:03 | 2223811 Id fight Gandhi
Id fight Gandhi's picture

Ah yes, 6 months ago.

I'm sure we'll be at 10,000% in no time. Bullish. Reality suspended.

Mon, 03/05/2012 - 11:04 | 2223814 GetZeeGold
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Break out the baseball caps.....everyone gets one!



Mon, 03/05/2012 - 11:45 | 2223955 redpill
redpill's picture

I'm waiting for the little sideways 8 percent on a little sideways 8 term.

Mon, 03/05/2012 - 11:59 | 2224009 Hacked Economy
Hacked Economy's picture

Can someone please tell me why the heck I've been subjected to Obama 2012 ads on ZH for weeks now?  Really?...on ZH???

Tyler, are your coffers running that low that the desperation is becoming critical?

Mon, 03/05/2012 - 14:35 | 2224586 Zymurguy
Zymurguy's picture

It's based on your search/browser history... stop looking at those Obama websites or you'll go blind!!!

Just do a search for internet flower delivery or pet food or somethine really pedestrian... then come back to the site.

Mon, 03/05/2012 - 14:59 | 2224730 Alexander Higgins
Alexander Higgins's picture

They are Google Adsense Ads, nothing to do with Tyler/ZH choosing.


"Obama for America" is pay big bucks for the ads to show up show up here.

Mon, 03/05/2012 - 20:47 | 2226296 StychoKiller
StychoKiller's picture

The answer to yer problem:

Follow the directions.

Mon, 03/05/2012 - 11:05 | 2223818 SHEEPFUKKER

1000% is the new 100%. 

Mon, 03/05/2012 - 11:10 | 2223836 BobPaulson
BobPaulson's picture

Just like David Lereah would say: It's different this time.

Mon, 03/05/2012 - 11:15 | 2223855 JPM Hater001
JPM Hater001's picture

I prefer Timothy Leary

If you don't like what you're doing, you can always pick up your needle and move to another groove.
Timothy Leary

Read more:

Mon, 03/05/2012 - 14:02 | 2224464 FlyoverCountryS...
FlyoverCountrySchmuck's picture

"1000% is the new 100%."


As an Obama voter once told me, it's just FREE MONEY, not "debt", if you never intend to pay it back.

Mon, 03/05/2012 - 11:12 | 2223843 Banksters
Banksters's picture

An internal ecb memo stated that if banks accept the psi aggreement they will allow them to "skull fuck the man on the street" to make up the difference.

Mon, 03/05/2012 - 11:46 | 2223959 redpill
redpill's picture

Please, don't be such a barbarian, these noble benevolent unelected technocratic dictators would never say something so crass.


They just wink.


Mon, 03/05/2012 - 12:18 | 2224064 whatsinaname
whatsinaname's picture

Some German retail investors losing big on this ? Somebody had made a comment about this a while ago..

Mon, 03/05/2012 - 13:22 | 2224303 JennaChick
Mon, 03/05/2012 - 10:58 | 2223797 pepperspray
pepperspray's picture

Looks like you've jumped out of a jelly into a jam

Mon, 03/05/2012 - 10:59 | 2223800 VisualCSharp
VisualCSharp's picture

Four digit returns, bitchez!

In all seriousness, Europe is so fooked.

Mon, 03/05/2012 - 11:13 | 2223847 BobPaulson
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So will Iceland, the canary in the coal mine, jump aboard the EURTitanic or start using loonies? I hope they do this soon, cause I wanted to visit Iceland this year to see what it is like in a miniature country where they told the banks to **** off.


Mon, 03/05/2012 - 11:00 | 2223804 GeneMarchbanks
GeneMarchbanks's picture

The supreme joke is that the rest of the continent 'representatives' can only pretend to understand the problem by insisting on it being a liquidity issue since financial 'engineering' has ruled out defaults as a thing of the past. The irony is worthy of Socrates.

Mon, 03/05/2012 - 11:11 | 2223839 Jayda1850
Jayda1850's picture

Exactly. The central planners have created a globalized zombie economy, where fundamentals are completely irrelevant. Little did people know that the zombie apocalypse would turn out to be a financial one.

Mon, 03/05/2012 - 11:52 | 2223982 alex_g
alex_g's picture

So when do we start double tapping the banks?

Mon, 03/05/2012 - 12:06 | 2224031 Think for yourself
Think for yourself's picture

I hereby nominate for ZH quote of the year the following:

Little did people know that the zombie apocalypse would turn out to be a financial one.

Mon, 03/05/2012 - 11:01 | 2223807 eurusdog
eurusdog's picture

Amazing. THis bubble pops and gopes to zero when Greece finishes the transition to slave of Germany!

Mon, 03/05/2012 - 20:50 | 2226304 StychoKiller
StychoKiller's picture

Greek bonds are in a bubble (reference the chart in the article, thou unbelievers!)

Mon, 03/05/2012 - 11:04 | 2223815 Cognitive Dissonance
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"....further making the case for a Greek redefault in just over a year..."

This is considered a win in some circles Tyler. The can was successfully kicked down the road one more year.

Mon, 03/05/2012 - 11:14 | 2223852 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

Yes, in the long run we are all dead, but we would much rather die next year than tomorrow.

Mon, 03/05/2012 - 11:17 | 2223861 BobPaulson
BobPaulson's picture

I think the can trajectory is closer to a month per kick. There is probably some kind of inverse Fibonacci algorith to predict the effectiveness of each can kick. Soon we'll need an cesium clock to measure the duration of each kick. I'm thinking of a neat fractal series or a Escher drawing would describe it well.

Mon, 03/05/2012 - 11:22 | 2223883 Cognitive Dissonance
Cognitive Dissonance's picture

Considering the cosmic time compression we are all beginning to experience, one month is the 'new' year. :>)

Mon, 03/05/2012 - 11:23 | 2223884 DeadFred
DeadFred's picture

When the survival rate for everyone drops to zero on a long enough time line, can-kicking is the whole game for those who see this as the totality of reality.

Mon, 03/05/2012 - 11:05 | 2223819 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

I'm sure the ECB still has them at par on their books.

Mon, 03/05/2012 - 11:09 | 2223831 Darkness
Darkness's picture

can someone explain how this works? i.e. if I were to buy a one year thousand euro bond, if this exists, what would the coupon and the yield be?

Mon, 03/05/2012 - 11:48 | 2223966 r00t61
r00t61's picture

Here's how it works:

Suppose you buy a 1-yr Greek bond, from the Greek government, for $100.  Suppose the coupon rate is 5%.  That means that in one year, when the bond matures, you'll get paid $105 = the principal of $100, plus the interest on the bond, $5. 

Now, as a bondholder, you can elect to trade your security on the secondary market, instead of waiting the year for the bond to mature.  Suppose you can't find anyone to buy the bond for the price you originally paid, $100.  Suppose you are only able to sell the bond for $95.  To get the new bond yield rate, divide the amount of the coupon - $5 - by the new selling price of the bond - $95.  In this case, $5/$95 * 100 = 5.26%.

You can see that the bond yield thus increases as the sale price of the bond as its traded on the secondary market decreases.  To get a bond yield rate of 1,000%, like in the story being reported, this means that our example bond, which originally cost $100, is now selling on the secondary market for $0.50.  That is, fifty cents.

Obviously, as bond yield increases, this means that the bond is worth less and less, which is a reflection of investors looking at Greek bonds and saying, "Man, these aren't such a good investment."

Mon, 03/05/2012 - 13:02 | 2224232 The Grip
The Grip's picture

Darkness' profile says unemployed trader...

+1 for good faith.

Mon, 03/05/2012 - 13:11 | 2224265 tabasco71
tabasco71's picture

Consider a £1,000 bond with a 10% coupon, paying each 6mths and principal at end of term...

Are you saying that if I want to buy the bond (in primary), I still have to pay £1,000 for it right now, even though I know is trading at £9.94?  If so, forget it.

I have modelled this on a 1 yr £1,000 bond with a 10% coupon - for it to have a 1006% yield means the bond is selling under par for £9.94.  Assuming the bond/Greece does not blow up before its first coupon date (assume 6mths from now) then I am due a coupn payment of £50 for a cost/risk of £9.94 and £100 if Greece survives for 12mths.  I don't really care about my principal after the first 6mths to be honest.  Infact, there is an extremely long shot chance that I will obtain £1000 in 12mths time.

So the only way I can make this work is if I can pick up a secondary market Greek bond which the primary investors may be looking to dump get out of for £9.94, correct?

With all the ECB, LTRO and other goalpost moving, I'd be "willing to bet" that £9.94 that Greece will still be around in 6mths time.

Please give some meaningful guidance as I am thinking about this seriously. 

Mon, 03/05/2012 - 13:51 | 2224422 r00t61
r00t61's picture

Well, assuming that Greek bonds can be held by Joe Public individual investor, and not just by large financial institutions, e.g., insurance companies, central banks, hedge funds, and the like, you also have to consider bond haircuts.  Right now, Greek bondholders are being asked to accept a haircut of up to around 50%, along with increased maturity times, as part of the second bailout package being granted it by the ECB.  In addition, through complex legalese, somehow these haircuts can supposedly avoid triggering CDS payouts.  Does your model consider these factors?

In addition, it's still possible that Greece eventually defaults, and/or plays subordination games, and a whole host of other lame accounting smokescreen tricks.  I suppose if you can get a hold of a bond for 9.94 pounds sterling, that's not much to risk for your bet. 

Still, if it were me, I'd take that 9.94 GBP and just get some good fish and chips and call it a day.  Leave the debt machinations to the wonks of foolish finance.

Mon, 03/05/2012 - 20:55 | 2226321 StychoKiller
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"It's finance Jim, but not as we know it..." -- Away Team

Tue, 03/06/2012 - 05:45 | 2227289 tabasco71
tabasco71's picture

Thanks for coming back.  I wasn't worrying about insuring/CDS, I was prepared to wing it as £9.94 seemed to be an acceptable risk reward.  However, I spoke with a friend last night and figured...

1. Accessing this market is really time consuming and frustrating (wide spread shows its not trading)

2. Real life coupon is only 4.1% (due to haircut?) rather than the 10% I used in my simple model to make the 1006% claim hold true

3. Although heavily discounted, actual price of 1yr bonds available to purchase were around £22

4. Coupon paid on maturity (12mths on the structure shown in the chart above - so not the 6mths I was willing to gamble)

5. There are various other transaction fees which further weaken the return

So, using my numbers (£1000 face discounted to £22, 4.1% coupon) the real return works out about 186% (£63 back for £22 invested) and if the intial investment is sunk (Greece defaults) then the real return is 86%.  

Still seem to be good returns... for any investment other than Greece!!  

I'm not sure where 1006% yield comes from (maybe considers a certain yield to maturity), but yeh, on balance, fish and chips is probably a more fulfilling investment decision.

Mon, 03/05/2012 - 11:09 | 2223832 fonzannoon
fonzannoon's picture

You buy the bond. If they are still around in a year you get 1000%. You buy some cds. If they are not around in a year the cds pays out. What am I missing here? It seems bulletproof.

Sarc/stuck on

Mon, 03/05/2012 - 11:10 | 2223837 Quintus
Quintus's picture

I hope Leo Kolivakis hasn't been too badly burned by this.  I recall he was regularly recommending the purchase of Greek debt.

Mon, 03/05/2012 - 11:11 | 2223838 marketblip
marketblip's picture

looks like PSI involvement could be higher than 85%, default averted

therefore these bonds look like a great return on investment

Mon, 03/05/2012 - 11:17 | 2223860 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

And what if you wanted/needed to sell Greek bonds right now?  The discount is tremendous.

The market is locked up; how is that a great investment?

Mon, 03/05/2012 - 13:21 | 2224300 marketblip
marketblip's picture

liquidity is certain to improve once the PSI goes through,

Mon, 03/05/2012 - 11:21 | 2223878 FrozenOut
FrozenOut's picture

Note the divergence at a rate faster than exponential on an logarithmic scale!  That's some graph.

Mon, 03/05/2012 - 11:13 | 2223846 Vincent Vega
Vincent Vega's picture

Greece is becoming so passe. Could we please move on to Portugal, Ireland, Spain, U.K., U.S., et al.... Let's really get the party started.

Mon, 03/05/2012 - 11:18 | 2223869 Mr Lennon Hendrix
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Mon, 03/05/2012 - 11:46 | 2223960 kito
kito's picture

some infections take time to spread, even though quacks are working on treatment...................

Mon, 03/05/2012 - 11:58 | 2224003 Nussi34
Nussi34's picture

First we have to watch how the Germans send planes to pick up the Greek gold!

Mon, 03/05/2012 - 11:16 | 2223859 mayhem_korner
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It's not every day we get to see yield charts with tick marks at 20,000 basis point intervals.

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