Amid the collapse of the global carry trade, no nation on earth has benefited more (and is now suffering more) from the dash-for-trash, buy-the-pig-sty trade than Greek stocks and bonds. Combining carry unwinds with uncertainty over snap Presidential elections (which could usher in a left-wing anti-EU party into power) and a 'technical-only' extension of its handouts from Troika and Greek capital markets are in freefalll. The Athens Stock Index is down over 11% on the day, destroying 3 weeks of gains; the Greek 3Y bond price has collapsed (as the carry-traders pile out through small doors) inverting the yield curve - never a good sign.
Greek stocks and bonds slumped after Prime Minister Antonis Samaras opted to bring forward the process of choosing a new head of state, risking parliamentary elections in Europe’s most indebted state as early as January.
Samaras today nominated Stavros Dimas, a 73-year-old former European Union commissioner, for the post. Voting will begin next week, on Dec. 17, with two further rounds possible. Samaras will have to rely on opposition votes to push through his pick for the mainly ceremonial post; without them, his government will fall.
“It is a high stakes gamble,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note. “Snap parliamentary elections in January could then bring left-wing Syriza into power in Athens.”
Stocks are tumbling...
Greek stocks -11% after govt brings forward presidential election. Biggest fall in around quarter of a century: pic.twitter.com/MUUcJweFil— Jamie McGeever (@ReutersJamie) December 9, 2014
and so are bonds...
Leaving the yield curve inverted for the first time since the bailout...
Remember the long-end is mostly held implicitly by the ECB as collateral while the short-end is what 'traders' trade around... it is clear that the market wants out.
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“Syriza may find itself winning an election, with less than a month before the program expires and Greece is left without a financial backstop,” said George Pagoulatos, a professor of European politics and economy in Athens.
But of course, when push comes to shove, no one wants to give up onmthe free-money EU gravy train so this will merely result in re-negotiation of the bailout terms.