Thread: Greece Bloodbath Throws Italy, Spain Back In PIIGS Default

Greece Risk Bloodbath Throws Italy And Spain Back In The PIIGS Default Mix

by Tyler Durden
04/18/2011 07:06 -0400
31 comments

And so we see another tipping point in action: while absolutely nothing has changed in the fundamentals of Europe's insolvent peripherals, today, for the first time since early January, we are seeing an absolute bloodbath in the risk gauges of the European periphery. As the PIIGS list below shows, spreads are surging, and while it is no surprise that Greece is now trading north of 1200 bps following a weekend full of Greek default chatter, the important observation is that Spain and Italy are once again in the default mix.

* Portugal 615 (+15) - officially insolvent
* Italy 156 (+13)
* Ireland 588 (+21) - officially insolvent
* Greece 1225bp (+89) - officially insolvent
* Spain 250 (+16)

As usual we are amused by the massively delayed reaction in what some continue to foolishly claim is an efficient market. Of course, expect a major overshoot of all risk indicators now that the world's attention is once again focused on Europe. Exhibit A: EURUSD which is now at 1.4290, even as it was trading at 1.45 on Friday. Hysteria is back.

From Reuters:

The cost of insuring Greek debt against default rose on Monday after a newspaper report that Greece had asked to restructure its debt, though the country's finance ministry later denied the report. Five-year credit default swaps (CDS) on Greek government debt rose by 84 basis points to 1220 bps, according to data monitor Markit. This means it costs 1.22 million euros to protect 10 million euros of exposure to Greek bonds.

Greek finance ministry sources have denied a newspaper report that Greece told the IMF and the European Union earlier this month that it wants to restructure its debt.

http://www.zerohedge.com/article/greece ... efault-mix

Will The Finnish Vote Dead End Europe's Bailout Bonanza?

by Tyler Durden
04/17/2011 18:26 -0400
103 comments

The early Finnish votes are in and it does not look good for Portugal. As Reuters reports, Finland's anti-euro True Finns made huge gains in an election on Sunday, raising the risk of disruption to an EU bailout of Portugal. The right-leaning National Coalition topped the ballot, gaining just over a fifth of all votes. Party leaders will start talks soon on forming a new government. The problem is that as the anti-euro moniker indicates, the True Finns are pretty much hell bent on vetoing the Portugal bailout which means the ongoing annexation of Europe's periphery by Olli Rehn is about to finish (and yes there is a finish-Finnish joke in there somewhere). Per Marketwatch: "Early results Sunday from Finland’s parliamentary elections suggest the anti-EU bailout True Finns party will hold the second-most number of seats and could even be part of a coalition government. Such an outcome may mean the EU’s planned bailout of Portugal is vetoed by Finland, a move that would roil the euro-zone markets. With half the votes counted the True Finns were on 19% support, and on course for 41 seats, tied with the Social Democrats and one seat less than National Coalition Party’s predicted 42-seat haul, the BBC reported. Finland is the only euro-zone country that requires bailouts to be approved by its parliament. Strong gains by the True Finns could derail a planned rescue for Portugal." What this means is that Goldman Sachs' European analysts will be scrambling all night to come up with loophole to European law that will not result in an epic plunge for the European currency, as apparently not even that sage among sages, Thomas Stolper, whose 2010 batting average of 0.000 made his contrarian calls manna from heaven in the past year, could anticipate this Black Swan. We will keep you informed of all the sell-side spin as it starts trickling in.

In the meantime, here is more from Marketwatch:

A stronger-than-expected showing by the True Finns, “or if some members from other parties take a similar line, could make things very touch and go,â€

Monday, April 18, 2011 12:41 PM

Next Phase of Sovereign Debt Crisis; Greek 2-Year Yields Top 20%; Greece Denies Restructuring Plan; Why the Denial?

A Greek newspaper reported that Greece is in talks with the IMF regarding debt restructuring. However, Greek Finance Minister issued this denial "Restructuring is not an issue we’re discussing".

Last week, the media went gaga over a no-news announcement from German officials that restructuring was on the table. It should not have caused a stir because anyone watching the market knows perfectly well a restructuring is coming. Denials from Greece cannot stop it.

Why the Denials from Greece?

Inquiring minds are likely asking "Why does Greece insist it will not restructure?"

The answer is simple: Greek public pension plans are loaded with Greek sovereign debt garbage. A restructuring would shatter the values of those plans and the expected payouts to the pensioners.

However, the market does not care what Greek or IMF officials think. Nor does the market care about those pension plans. A yield of 20.34% on the 2-year government bond is proof enough.

This is what happens when the market takes matters into its own hands.

Greek 2-Year Sovereign Debt Yield



Greece Denies Restructuring Plan

Bloomberg reports Greece Denies Restructuring Plan as Traders Raise Default Bet

Greece said it has no plans for a debt restructuring even as German officials openly discuss the possibility and investors charge a record amount to insure the country’s obligations.

“Restructuring is not an issue we’re discussing,â€