Greek CDS At New Record 762bps, Highest Running Sovereign Spread, Portugal Blows Up Too

Greece 5y CDS now at a meaningless 762bps, which is the highest non-upfront CDS spread for any sovereign. This alone should be enough for another monster day in the decoupled algo-driven US markets. And Portugal is now where Greece was just a few weeks ago: its own CDS just hit 350 bps (40 wider), as its 10 spread widens by 17 bps to 235 bps. While the Greek negative basis is still about 250 bps, Portugal is still less pronounced. We expect the Portuguese basis to hit negative territory soon. According to CMA the biggest wideners are all Spanish and Portuguese entities: Enel SpA at 137.07(+16.04), Banca Monte dei Paschi di Siena SpA (SUB) at 215.22 (+23.25), Banco Popolare SC at 164.46 (+15.67), Banca Monte dei Paschi di Siena SpA at 122.64 (+10.82). As for Greece, it's too late: Germany says country may have to leave the Eurozone, as we suspected was Germany's intention all along.

From Reuters:

  • Says Germany still might withhold aid to Greece
  • Says payout depends on Athens meeting aid conditions
  • Says euro exit plus devaluation might benefit Greece
  • No EU provision for quitting single currency zone

Greece might have to quit the euro zone for a time if the country failed to tighten its belt sufficiently to qualify for emergency aid, a budget expert with Germany's junior coalition party said on Tuesday.

A temporary exit from the single currency might benefit Athens if accompanied by a devaluation, the Free Democrats' (FDP) Juergen Koppelin told Deutschlandfunk radio.

The EU treaty makes no provision for a euro zone member to quit the single currency, and top regional policymakers including ECB president Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker have dismissed the possibility of Greece doing so.

"One may have to say no (to aid) if Greece does not meet conditions and the country just comes along to get money under more favourable terms from the euro zone than from banks," Koppelin said.

Asked whether a German "no" meant that Greece would no longer get any money, Koppelin said: "That can't be ruled out, right up to the point where Greece would have to leave the euro zone for a time.

"This is not (monetary union) breaking up. The Greek currency could be depreciated. That could even help them with exports." Koppelin gave no further details of how a Greek exit from the euro or a devaluation might be structured.