Forever torn between a realistic assessment of the chances of avoiding restructuring or default over the next several years and the immediate relief of an EU bailout, bond traders pulled in Greek yields Forever torn between a realistic assessment of the chances of avoiding restructuring or default over the next several years and the immediate relief of an EU bailout, bond traders pulled in Greek yields and the Bund spread from their historical levels of yesterday as the Greek Government made official its request for EU/IMF aid.
In the common trope of all politicians when markets do not do what they want, Greek Prime Minister George Papandreou said, “There was no response from the markets, either because they didn’t believe in the political will of the EU or because they decided to go on with speculation.” No one in the markets, I am sure, can come up with any logical reasons to doubt EU commitment, Greek veracity or the long-term logic of a bailout that must extend to several years, though only one is budgeted.
According to Mr. Papandreou, this is “A new Odyssey for Greece.” Didn’t the Odyssey take a decade? Is Greece starting the trip now? A decade of financial restructuring in European social welfare budgets will destroy the euro, the EMU and probably case a war, though the Europeans will have to fight it with paint guns and harsh language since they no longer have militaries.
The Greek 10-year benchmark bond is currently yielding 8.672% (11:45 am) having peaked at 8.959% earlier in the session. The Bund spread is 562 basis points, 5.62%, after having closed at 578 basis points yesterday. The two-year benchmark bond is at 10.315%, it traded to 10.566% earlier. As recently as March 29th the two-year paid just 4.380%.