In waht appears to be some level of German backing down, fiery FinMin Schaeuble has, reportedly said the following:
*SCHAEUBLE SAID TO SAY GREECE MAY BE ABLE TO TAP EU SUPPORT FUND
*SCHAEUBLE SAID TO SEE GREECE STAYING IN EURO EVEN IF 'NO' VOTE
Thus spurring the probability of a consequence-less "no" vote on Sunday enabling the increased negotiating position that The Greek government had hoped for. Of course, desperate for any excuse, stocks and EUR are rallying on this and bonds are selling off.
GREEK FINANCE MINISTER SAYS GREECE WILL NOT PAY IMF ON TUESDAY.
Regulators across Europe are beginning to curtail trading in Greek assets as the country’s stock market remains closed and Greeks grapple with capital controls and prepare for a default to the IMF at midnight.
In our overnight market wrap, we said that with the Greek D-Day doubling as quarter end for countless hedge funds most of which are now suddenly underwater, there would be a plethora of rumors designed to spark buying momentum algos which would provide brief selling opportunities. Alas, Germany appears to have crushed that particular option, when moments ago a German made it clear that at this point the only catalyst will be the now virtually certain Greek default to the IMF at midnight (+/- 1 leap second) Greek time. To wit: TOO LATE TO DISCUSS GREEK PROGRAM EXTENSION: GERMAN OFFICIAL
The Greek D-(efault) day has arrived, and with it so has quarter-end window dressing for many underwater hedge funds (recall the S&P is now red for the 2015) which means the rumor mill today will be off the charts. And sure enough, less than an hour ago, futures exploded higher as did the EURUSD, following another "report/rumor" of a last minute detente between Greece and the Troika when Greek Ekahtimerini said that "Tsipras is reconsidering the last-ditch offer made by European Commission President Jean-Claude Juncker, sources have told Kathimerini."
On Friday morning, at around midnight PDT, the price of silver had a mini crash, dropping more than 10 cents in one second. This is our forensic analysis.
"Millions of people in ex-Communist Bulgaria, Macedonia, Albania, Serbia and Romania have deposits in banks owned by Greek lenders, putting this corner of south-eastern Europe in the frontline if there is contagion from the Greek crisis."
Earlier today, as the exchange between Greece and its creditors got increasingly belligerent, Estonian Prime Minister Taavi said that "Greece’s debt would still remain outstanding and creditors would expect this money back." So did this latest antagonism change the Greek mind? According to a flash headline by the WSJ released moments ago, not all. In fact, Greece just made it official that it would default to the IMF in just over 24 hours: "Greece won't pay IMF tranche due Tuesday, government official says"
It’s all so very 1914-ish. Draghi’s cap on bank-supporting Emergency Liquidity Assistance (ELA) is the modern day equivalent of Czar Nicholas II’s troop mobilization. Good luck walking that back.
Having concluded last night that Puerto Rico debt is "unpayable," and that his government could not continue to borrow money to address budget deficits while asking its residents, already struggling with high rates of poverty and crime, to shoulder most of the burden through tax increases and pension cuts, Padilla confirmed tonight that: PUERTO RICO TO SEEK "NEGOTIATED MORATORIUM", 'YEARS' OF POSTPONEMENT IN DEBT PAYMENTS. Likening his state's situation to that of Detroit and New York City (though not Greece), Padilla concluded, the economic situation is "extremely difficult," which is odd because just a few years ago when they issued that bond - everything was awesome?
Whether, or not, a Greek exit from the Eurozone or a potential debt default is "the thing" that sparks the next major correction in the markets is unknown. Historically, such a widely "known" event is generally already factored into the markets and has much less of an impact when that event eventually comes to fruition. As Art Cashin suggested this morning: "I think China may be more important than Greece. Stick with the drill – stay wary, alert and very, very nimble."
It seems Goldman Sachs' conspiracy theory was right all along...
ECB'S COEURE SAYS ECB IS EVEN READY TO USE NEW INSTRUMENTS, WITHIN ITS MANDATE
GREECE COULD EXIT EURO, COEURE SAYS IN LES ECHOS INTERVIEW
This is exactly what The ECB wanted all along (and their leaders overlords) - all they needed was an 'excuse'. Or, in the parlance of Rahm Emanuel's times, "Let no Greek default crisis go to QE waste."
The unanticipated recent Greek political news flow and consequent market stress are addressed in our portfolio construction by the resilience we built into higher volatility scenarios and unexpected sources of turbulence. Indeed, the risk is not so much Greece but the structural illiquidity of the market which will exacerbate any moves up or down which should be part of the equation.
With the ATMs running dry and lines forming at gas stations and grocery stores, Greeks are understandably restless and have once again gathered en masse in Syntagma Square.
Referendum is a CYA by Tsipras & Syriza, but a deal is by no means the end of anything...