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Author: Alexander Gloy

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  • Euro crisis not going away – when will Greece be allowed to default?

    Alexander Gloy

    The love affair with Spanish debt (after recent auction) was short – the 5yr CDS (credit default swap) rate short up to 250bps (+30) today (see chart). Source: CMA Meanwhile Greek 10yr bonds widened to 9.77% (+0.29) compared to Germany’s 2.69% (-0.07). This crisis is not going away, and the market does not seem to…

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  • Greece replaces Argentina in ranking of sovereigns likely to go bust

    Alexander Gloy

    Greek 10yr government bond yields 9.48% (+0.07) today – on their seemingly unstoppable march towards double digits. If everything goes according to plan (which it never does), Greece’s debt-to-GDP ratio will peak at 150% in 2012 or 2013. Hence if you pay 10% interest on your debt you need to fork over 15% of GDP…

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  • Who is right – the bond or the stock market?

    Alexander Gloy

    Since six months the correlation between 10yr Treasury bond yields (purple, left hand scale) and the US stock market (right hand scale) had been perfectly positive. Fears about European defaults and thereby lower world growth led to falling stock prices, which led to rising bond prices (or falling yields). Less growth = less inflation = good…

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  • GLD now the world’s second largest ETF

    Alexander Gloy

    GLD is now the world’s second largest ETF (exchange traded fund) with 1,308 tonnes of gold worth $51bn (SPY is the biggest one with $83bn). Governments finally realize that too much debt leads to default. Now they try to tighten the fiscal belt. All that it left to avoid financial disaster is “quantitative easing” (=…

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  • Is corporate debt safer than government debt?

    Alexander Gloy

    Another day in the bond market, another day of sovereign spread widening. 10yr Greeks now (June 16) yield 9.34% (+0.26), Spanish 4.88% (+0.14), compared to German 2.66% (unch.). On Thursday, Spain will try to sell EUR 3.5bn in new 10yr and 30yr bonds. Good luck. We won’t even know if the auction failed or not…

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  • Greek 10yr bond yield above 9% after downgrade – Spain next?

    Alexander Gloy

    When a picture speaks louder than words: the Greek 10yr bond yield. After Moody’s downgraded Greece to “junk” it fell out of certain government bond indices and hence forced selling was expected. Despite best efforts by the ECB to manipulate Greek bond prices upwards they fell, causing the yield rising to 9.08% (+0.76). Meanwhile, top…

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  • Greece: A Ratings History

    Alexander Gloy

    Everything seemed fine until end 2009. Few people talked about it. The debt was there. The deficits known. But Greece was still able to issue more debt. Until January 2010. S&P woke up first (BBB- is the lowest investment-grade rating; below means “junk”): Source: FT MoneySupply Blog Luckily the country is run by trustworthy politicians who…

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  • Short term US T-bills almost back to zero

    Alexander Gloy

    Look at 1-month yield for US Treasury bills: almost back to zero. Risk is out – everyone wants to be in a (presumably) safe place (even if there is basically no interest). $1,000,000 invested at 0.02% for one months yields less than $20. Pays for the cab ride home. With Libor steady at above 0.5%…

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  • Belgium CDS rise after election – Moody’s downgrades Greece to “junk”

    Alexander Gloy

    Decent move in Belgian CDS (credit default swaps) today (+16% to 130bps) after Flemish separatists emerged as strongest party in Sunday’s elections. After elections in 2007 it took nine months to form an unstable five-party coalition (leading to three governments in as many years). Fears are the highly indebted country might break up leaving the French…

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  • How the stock market really works:

    Alexander Gloy

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