On The Imminent Slovenian Government Collapse And Greek T-Bills

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

Slovenia and Greek T-Bills

It looks like the Slovenian Government may collapse today.  It is one of the smallest EU members, but an EU member nonetheless.  Slovenia accounts for about 0.5% of EFSF and is Aa2/AA  

Looks like Greece won't default today, though it seems that more and more people think it is the likely outcome, and actually think it is the best outcome from Europe.  Stocks continue to rally on every bit of good news related to Greece, but there is a growing consensus that Greece should default sooner than later, and that it would be easier for Europe to deal with that, than the eventual default.

Still waiting for the "private sector initiative" results on Greece.  I really am not sure how much of a benefit Greece gets, but the banks transfer about 40% of their Greek exposure to EFSF exposure.  Not a bad deal for banks considering where Greek bonds trade.

The Greek T-bill was a success, although my understanding is somehow t-bills are treated differently and cannot default under EU law.  I'm not sure exactly how that works, or if it has been tested, but the T-bills do not get rated by any of the rating agencies, unlike their normal debt which is Ca/CC.  The 13 week yield of 4.5% is very expensive relative to actualy 3 month Greek paper which trades around 87 to yield 65%.  So whatever the beneficial of status of t-bills is, it has a huge impact on their yield, but also means they cannot be looked at as much of a sign of Greece's health.    Today's auction is useful but they have 2 billion coming due on Friday.  Since 4.5% seems very good for Greece, I'm not sure why they don't issue more T-bills, but I assume there is some restriction on that in the law.