A glance at a chart of 5Y Greek Govvies shows the last trade at a 16% yield, well below the worst 20% yields - suggesting yet another storm in a teacup as "markets know best." However, this is entirely wrong! Greek government bond trading has stopped... 5Y bonds have not traded since April 24th. In fact given current equity levels, 5Y yields would be closer to 22% - as bad they have been ever. The entire fixed income market in Greece has died with CDS liquidity having collapsed and only sporadic longer-dated bonds trading.
Investors have not traded Greek government bonds on the HDAT electronic platform for almost a month as the country struggles to reach a vital cash-for-reform deal with its creditors, data from Greece's central bank showed on Friday.
The data shows not a single bond has been traded since May 20, in a sign investors have moved to the sidelines, lacking the appetite to buy what is currently considered one of the riskiest assets in the world.
In what is widely billed as another last-ditch attempt to break the deadlock, euro zone leaders will hold an emergency summit on Monday evening on Greece, where bank withdrawals have accelerated and government revenues slumped.
In May and April only 4 million euros worth of bonds have been traded, compared with 63 million euros in March, 241 million in February and 560 million in January.
About 10.4 billion euros were traded in 2014.
Greek government bonds trade mostly over the counter, but the data from HDAT is a proxy for total volumes, traders say.
The last barren period of this length on HDAT was just before Greece's debt restructuring in March 2012. From September 2011 to February 2012 only 7 million euros of Greek bonds changed hands.
Given the relationship with stocks, it is probably a good thing that bonds stopped trading and therefore do not FIX the losses mark-to-market on bank balance sheets
[11]
And as Bloomberg reports, it got worse this week
None of the government’s bonds traded publicly last week nor derivatives insuring them, according to data from the Bank of Greece and the Depository Trust & Clearing Corp.
Greek bank bonds are trading sporadically... indicating significant weakness
[12]
And CDS imply an 80%-plus probability of default (given standard recovery assumptions)...
[13]
Even as liquidity has entirely disappeared...
Charts: Bloomberg
