Saturday, January 30, 2010

Crisis in Spain and Greece: Plan A and Plan B

Credit default swaps and rising interest rates suggest Greece is in serious trouble in spite of the ECB's futile attempts to downplay the situation. Please consider Greek Bonds Show Waning Faith It Can Avoid Bailout. http://www.bloomberg.com/apps/news?pid= ... irki9poqEQ

Greece is losing the confidence of bondholders that it will reduce the largest budget deficit in the European Union amid increased speculation that the country won’t be able to meet its debt obligations.

The nation’s government bonds are the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent, Bloomberg/EFFAS indexes show. Credit-default swaps tied to Greece trade at about the same levels as Dubai when it got a $10 billion bailout from Abu Dhabi in December. Greek 10-year bonds rebounded today after EU Monetary Affairs Commissioner Joaquin Almunia said the country won’t default.

Investor concern that Greece can’t tackle its budget deficit is hurting the debt of national utility companies and banks, said Philip Gisdakis, head of credit strategy at UniCredit SpA in Munich.

“If you fear a Greek crisis then you should not only avoid government bonds but corporates as well,â€