Follow the motions: with Greece imploding once again, and bonds back to 7%+. let's try everything all over again and hope it works this time: IMF is *yawn* sending another team to Greece, Dominque Strauss-Kahn reports, even as Greek PM G-Pap has sent a letter to top officials in Europe and the IMF, requesting talks to discuss the details of a contingency financial support plan for his country. Um, we did that charade last weekend: it worked for 24 hours, just long enough for you to issue $2.1 billion in Bills, which auction by the way bankingnews.gr recently reported was a scam, with half the bids being fake! Well, congrats, but it ain't gonna work any more, as the market has called your half-pregnancy bluff. But that does not stop Greece, and its ex-Goldmanite head of public debt management, from demonstrating just how clueless it is when accessing the capital markets. At least Greece is acknowledging that at this point formal aid request is merely a matter of a few days. We are now convinced that Greece is in fact doing all it can to be allowed to default, yet Germany and Europe are forcing a two tier sovereign debt capital structure, with new guaranteed money becoming the Secured tranche in the Greek balance sheet. Of course this means that any demand for the "Unsecured" portion will disappear as soon as the bailout mechanism is finally activated.
According to Market News:
"Greece’s Finance Minister George Papaconstantinou sent a letter Thursday to top officials in Europe and the International Monetary Fund, requesting talks to discuss the details of a contingency financial support plan for his country. Though the letter makes clear that Greece is not yet asking for the help to be activated, the request for a meeting nonetheless suggests that, with Greek bond spreads once again widening and prospects for a U.S. dollar bond of up to $10 billion quickly evaporating, the formal request may not be long in coming.”
Eurozone finance ministers on Sunday announced that they stood ready to provide loans to Greece of up to E30 billion in the first year of a 3-year plan, with more funding negotiable in subsequent years. As part of the plan, the IMF would contribute between E10 and E15 billion of its own money, sources said. But details of exactly how the EMU and IMF portions of the plan would mesh together have been vague to non-existent.
A senior Greek Finance Ministry official told Market News that With the call for a meeting today, Greece is seeking to iron out “immediately” exactly what the details of the joint EMU-IMF plan will be, and what fiscal, macroeconomic and other conditions will be imposed on Greece in exchange for the aid.
It seems likely that Greece is feeling pushed to the wall, as the yields on its sovereign debt remain stubbornly high despite last Sunday’s aid agreement. Another factor may be the diminishing prospects for funding its needs in financial markets even at elevated interest rates.
The Wall Street Journal reported earlier today that Greece was being forced to slash its expectations for a U.S. dollar bond, which the Greek government had hoped would raise $5 billion to $10 billion. Now, the Greeks are looking at a figure in the range of $1 billion to $4 billion, and could end up scrapping the bond sale altogether, the newspaper said.
It cited a Greek official, who acknowledged that there appears to be very little appetite for Greek paper among U.S. investors.
However you slice and dice it, this is all very euro negative, and once the shorts clear out, we expect that the Euro will continue its one way path lower. Which of course means scrambling for the Fed which is starting to officialy lag in the debasement rally. We expect California and other bankrupt states to take a much more prominent media appearance in the next month, as the US reminds the world just how bankrupt it itself is.