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  • G20 bond victory – stock market ignores reality?

    Alexander Gloy

    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

    Alexander Gloy

    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%

    Alexander Gloy

    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?

    Alexander Gloy

    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…

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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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  • 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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