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IMF talks with Hungary suspended
The IMF on Sunday suspended talks with Hungary over disagreement on 2011 budget deficit (Hungary wants more than 3.8%, IMF says 3% max). Hungary had asked for EUR 20bn from IMF, EU and World Bank in October 2008 after other sources of financing dried up. It is highly unusual for a country to let negotiations…
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Are Italian banks failing stress tests?
Bank of Italy Governor Mario Draghi said he was “amazed by the fantasy” of a press report today saying that stress tests of the country’s banks showed that three of the nation’s biggest lenders may need to raise 25 billion euros in additional capital. Draghi said at a press conference in Rome that stress testing…
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A failed auction at the ECB spells trouble
The European Central Bank just experienced a failed auction. A failed auction means that you did not achieve to sell a predetermined amount of securities to the market. Here, the ECB wanted to mop up EUR 55bn in liquidity (to “sterilize” a similar amount of European government bonds they bought) and received bids for less…
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Joke du jour: Greece to tap markets for more money
“Greece will go to the markets mid-July, issuing T-bills of three, six and twelve months,” Deputy Finance Minister Philippos Sachinidis told Reuters. Wasn’t the EUR 110bn bail-out meant to prevent Greece from having to raise money in the market until 2012? And isn’t their fiscal consolidation program “ahead of the plan”? Seems that is not…
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Swiss Franc strength versus Euro unstoppable
Despite the SNB having accumulated weak currencies amounting to half its GDP the Swiss Franc is still in high demand: Source: ForexHelp.com
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G20 bond victory – stock market ignores reality?
The G20 meeting in Toronto brought a slight victory for bond owners as governments agreed the obvious – current deficit levels are unsustainable. The meeting asked all countries to follow “growth-friendly fiscal consolidation plans”, which is a perfectly impossible. The plan is to halve deficits by 2013 and stabilize the ratio of debt to gross…
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Greek CDS blow-out
On Wednesday Greek CDS (Credit Default Swaps) blew out to a new record of 1,118 bps (+184): Source: CMA This implies a 68% likelihood of default, topping even Venezuela (59%) and Argentina (49%). With interest rates above 10% it is mathematically impossible for Greece to repay EUR 450bn of debt (or 150% of GDP). I…
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Red flag alert: Greek 10yr government bond yield surpasses 10%
Greek 10yr government bond yields today reached 10.37% (+0.60) as credit default swaps (cost of insuring against bankruptcy of the Greek government) rose 85bps to 940. Even 2yr bonds yield 9.78% (+0.57) – a time period presumably covered by the European bail-out package. Spain (10yr 4.52% +0.07), Italy (4.04% +0.07) and Portugal traded wider compared…
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Swiss Franc exchange rate controls – 1971/2 deja vu?
After having spent half of Swiss GDP on intervening (unsuccessfully, see chart) in the foreign exchange markets the SNB (Swiss National Bank) is at the end of its wit. Source: Forexhelp.com If you’d like to know what’s next in store you only have to go back 40 years: April 30, 1971 – Rich Germans have…
Author: Alexander Gloy
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