Dubai - meet Greece. Apparently credit traders appreciate biblical allusions, as Greek Prime Minister George Papandreou "promised" for the third time today that all is good in the debt-stricken country, claiming there is "no way" the country would leave the euro or seek aid from the IMF. The ECB's reponse: Greece's draft law on the restructuring of business and professional debts "could have negative impact on market liquidity." Credit's response: Greek CDS surges to an all time high of 327 bps, and the country now represents 24% of SovX risk.
Yet will Greece really be the cause of the latest bubble pop? Earlier Kyle Bass, recapping Dylan Grice's report word for word, noted the increasingly critical situation in Japan, courtesy of its demographic shift, which may soon lead to a funding crisis in the world's second largest economy.
Also note Kyle's observations on why the government is stuck in never equitizing failed financial firms: the trade off - alienating the traditional bond buyers. However, with both China and Japan becoming increasingly second-rate players in US sovereign funding, does this imply the TBTF picture is about to shift, and the next time the financial system collapses, are equities and even sub debt tranches going to be wiped out?