Greece has been in the news a lot over the last 24 hours. Let's recap:

 Bloomberg: Greece May Find Lukewarm U.S. Reception for Its Bonds

April 7 (Bloomberg) -- Greece may discover it’s no cheaper to sell bonds in the U.S. than in Europe as the government seeks to persuade investors it can plug the region’s biggest budget deficit.

Investors may demand a yield of as much as 7.25 percent to buy Greek 10-year dollar bonds, 410 basis points more than benchmark German bunds and 330 basis points more than Treasuries, according to Paris-based Axa Investment Managers, which oversees about $669 billion. TCW Group Inc., which manages $115 billion in assets from Los Angeles, says Greece may have to offer a premium of as much as 400 basis points over Treasuries.

Petros Christodoulou, director general of Greece’s Public Debt Management Agency, said March 31 the country planned a “roadshow” in the U.S. and maybe Asia to drum up investor demand for a sale of dollar-denominated bonds. The country may offer as much as $10 billion of the securities, the Wall Street Journal reported the same day. Greece is struggling to tackle a budget deficit that is equivalent to 12.7 percent of gross domestic product, more than four times the European Union’s 3 percent limit.

Anybody present at these road shows should print out a copy of the post Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! and"Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire!. Be sure to have the salespersons answer the hard questions posed in those pieces. Subscribers can feel free to whip out the subscription material and ask for explanations and clarifications - File Icon Greece Public Finances Projections. I am anxious to hear what would be said in response. At this point, I see a Greek effective default as a foregone conclusion.

More on this topic: Euro, Greek Bonds Drop on Rescue Concern; Most U.S. Stocks Gain

From CNBC: Greek Banks Hit by Money Moved Offshore: Report

Greek banks are being hit by a wave of redemptions as rich citizens and companies look to move their money to big global banks or offshore as the country's debt crisis rages, the Telegraph newspaper reported on its website.

The report appeared to contradict recent data from the European Central Bank and comments to Reuters by analysts and Greek banking sources, who said there was no clear evidence of a major, extended deposit outflow from Greek banks.

The UK newspaper said late on Monday that big depositors have been clamoring to move their cash to international financial firms such as HSBC or France's Societe Generale, which operate large branches in the country.

They are among those to have received several billion euros of new money, it said without specifying sources.

... More than 3 billion euros ($4.05 billion) of deposits held by Greek households and companies left the country in February, while in January about 5 billion euros of deposits were moved out, the Telegraph quoted figures from Bank of Greece as showing.

Switzerland, the UK and Cyprus have been the largest recipients of the money, with the wealthiest Greeks looking to move their deposits to Swiss banks accounts to escape the more punitive tax measures many fear will be introduced in the wake of the country's economic crisis, the newspaper said.

Subscribers should reference:

From the Greek banking site, bankingnews.gr: [coarsely translated] Greek long bond investors - At 450 bps premium still will not lend to Greece - In 382 m.v.to spread  

 

The alarm sounding clearly leading market players and officials of foreign banks saying that realizations from real money accounts ie real long-term investors that occurred yesterday is a clear warning that unless a reduction in the spread immediately and climb to 450 bp everyone unload bonds and then completely lost control. 
Today logically must react and reduce the spread sparingly and if that does not happen then just completely lost control and even very briefly highlighted the www.bankingnews.gr the morning and indeed no reaction as the spread falls to 382 bps with selective purchases from JP Morgan.
According to sources confirmed when the spread was at 300 basis points and estimated that it will move to the 400 bp 2 weeks earlier, indicating that 
1) Apart from the special short yesterday sold many long-term investors. The short want to test whether an instrument of support from the EU and the IMF reach the boundaries of Greece, although they risk but the returns they achieve are less striking because of the huge amount of holding spreads. 
But at least inspire concern that sell and long-term investors. 
hit stop losses and mandatory sold their investment positions. 
The crucial point is the 450 basis points if the spread up to where it will just completely lost control at bends. 
The 450 bp activate all mechanisms for the realization of direct positions in Greek bonds. 
2) The 450 bp are but a milestone in the bond market as more than just levels the state will not be able to borrow. 
According to well informed sources have already reported cases of investors who have indicated that over 450 bp longer be interested in bonds bearing in mind that the 10-year yields for example have reached or will tend to reach 8%. 
3) Today also when the spread slipped to 405 basis points late was the statement of Finance Minister, Mr Papaconstantinou that Greece has not requested any change in support mechanism from the EU and the IMF . 
Some sources say that the statement was made at the last minute and while the market was closed to prevent far worse. 
Please note that the mix of change in terms of device support, new scenarios and bankruptcy sales were short and long resulted in the spread be found by 405 basis points is to rise 65 basis points is a historical record.
 Please remain cognizant of the fact that a 400 basis point spread over treasuries is dead center in junk bond territory, with the likes of QVC Network, and the ilk!
 
The insane asylum has issued a statement. G-Pap has seen that his country would be Friendo'ed if Greece does not agree to austerity (which was part of the original agreement but whatever) and so has issued the following statement: "Responding to questions by journalists regarding actions taken by Greece to change the recent EU summit aid mechanism, the Greek Finance Minister clarified that there has not been any action on behalf of our country to change the terms of the recent EU Summit agreement." In the meantime rich Greeks have likely moved pretty much all their domestic deposits to some other Goldman Sachs controlled provenance. 

Greece has been in the news a lot over the last 24 hours. Let's recap:

 Bloomberg: Greece May Find Lukewarm U.S. Reception for Its Bonds

April 7 (Bloomberg) -- Greece may discover it’s no cheaper to sell bonds in the U.S. than in Europe as the government seeks to persuade investors it can plug the region’s biggest budget deficit.

Investors may demand a yield of as much as 7.25 percent to buy Greek 10-year dollar bonds, 410 basis points more than benchmark German bunds and 330 basis points more than Treasuries, according to Paris-based Axa Investment Managers, which oversees about $669 billion. TCW Group Inc., which manages $115 billion in assets from Los Angeles, says Greece may have to offer a premium of as much as 400 basis points over Treasuries.

Petros Christodoulou, director general of Greece’s Public Debt Management Agency, said March 31 the country planned a “roadshow” in the U.S. and maybe Asia to drum up investor demand for a sale of dollar-denominated bonds. The country may offer as much as $10 billion of the securities, the Wall Street Journal reported the same day. Greece is struggling to tackle a budget deficit that is equivalent to 12.7 percent of gross domestic product, more than four times the European Union’s 3 percent limit.

Anybody present at these road shows should print out a copy of the post Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse! and"Greek Crisis Is Over, Region Safe", Prodi Says - I say Liar, Liar, Pants on Fire!. Be sure to have the salespersons answer the hard questions posed in those pieces. Subscribers can feel free to whip out the subscription material and ask for explanations and clarifications - File Icon Greece Public Finances Projections. I am anxious to hear what would be said in response. At this point, I see a Greek effective default as a foregone conclusion.

More on this topic: Euro, Greek Bonds Drop on Rescue Concern; Most U.S. Stocks Gain

From CNBC: Greek Banks Hit by Money Moved Offshore: Report

Greek banks are being hit by a wave of redemptions as rich citizens and companies look to move their money to big global banks or offshore as the country's debt crisis rages, the Telegraph newspaper reported on its website.

The report appeared to contradict recent data from the European Central Bank and comments to Reuters by analysts and Greek banking sources, who said there was no clear evidence of a major, extended deposit outflow from Greek banks.

The UK newspaper said late on Monday that big depositors have been clamoring to move their cash to international financial firms such as HSBC or France's Societe Generale, which operate large branches in the country.

They are among those to have received several billion euros of new money, it said without specifying sources.

... More than 3 billion euros ($4.05 billion) of deposits held by Greek households and companies left the country in February, while in January about 5 billion euros of deposits were moved out, the Telegraph quoted figures from Bank of Greece as showing.

Switzerland, the UK and Cyprus have been the largest recipients of the money, with the wealthiest Greeks looking to move their deposits to Swiss banks accounts to escape the more punitive tax measures many fear will be introduced in the wake of the country's economic crisis, the newspaper said.

Subscribers should reference:

From the Greek banking site, bankingnews.gr: [coarsely translated] Greek long bond investors - At 450 bps premium still will not lend to Greece - In 382 m.v.to spread  

 

The alarm sounding clearly leading market players and officials of foreign banks saying that realizations from real money accounts ie real long-term investors that occurred yesterday is a clear warning that unless a reduction in the spread immediately and climb to 450 bp everyone unload bonds and then completely lost control. 
Today logically must react and reduce the spread sparingly and if that does not happen then just completely lost control and even very briefly highlighted the www.bankingnews.gr the morning and indeed no reaction as the spread falls to 382 bps with selective purchases from JP Morgan.
According to sources confirmed when the spread was at 300 basis points and estimated that it will move to the 400 bp 2 weeks earlier, indicating that 
1) Apart from the special short yesterday sold many long-term investors. The short want to test whether an instrument of support from the EU and the IMF reach the boundaries of Greece, although they risk but the returns they achieve are less striking because of the huge amount of holding spreads. 
But at least inspire concern that sell and long-term investors. 
hit stop losses and mandatory sold their investment positions. 
The crucial point is the 450 basis points if the spread up to where it will just completely lost control at bends. 
The 450 bp activate all mechanisms for the realization of direct positions in Greek bonds. 
2) The 450 bp are but a milestone in the bond market as more than just levels the state will not be able to borrow. 
According to well informed sources have already reported cases of investors who have indicated that over 450 bp longer be interested in bonds bearing in mind that the 10-year yields for example have reached or will tend to reach 8%. 
3) Today also when the spread slipped to 405 basis points late was the statement of Finance Minister, Mr Papaconstantinou that Greece has not requested any change in support mechanism from the EU and the IMF . 
Some sources say that the statement was made at the last minute and while the market was closed to prevent far worse. 
Please note that the mix of change in terms of device support, new scenarios and bankruptcy sales were short and long resulted in the spread be found by 405 basis points is to rise 65 basis points is a historical record.
 Please remain cognizant of the fact that a 400 basis point spread over treasuries is dead center in junk bond territory, with the likes of QVC Network, and the ilk!
 
The insane asylum has issued a statement. G-Pap has seen that his country would be Friendo'ed if Greece does not agree to austerity (which was part of the original agreement but whatever) and so has issued the following statement: "Responding to questions by journalists regarding actions taken by Greece to change the recent EU summit aid mechanism, the Greek Finance Minister clarified that there has not been any action on behalf of our country to change the terms of the recent EU Summit agreement." In the meantime rich Greeks have likely moved pretty much all their domestic deposits to some other Goldman Sachs controlled provenance. 

Implied volatility for the big banks is down across the board, just about where it was before the system went into convulsions. This implies the coast is clear, as do the share prices of many banks.

Hard core forensic and fundamental analysis implies otherwise. So does the Fed's actions, which still incorporates ZIRP policy, as well as the waffling at FASB. We will either have smooth sailing from this point on out or there is a nasty surprise waiting (on and off balance sheet) for bank investors in the near future. I invite readers to weigh in with their opinions.

image001.png

As you can see, we are just about where we were in 2007 in terms of average volatility. 

Implied volatility for the big banks is down across the board, just about where it was before the system went into convulsions. This implies the coast is clear, as do the share prices of many banks.

Hard core forensic and fundamental analysis implies otherwise. So does the Fed's actions, which still incorporates ZIRP policy, as well as the waffling at FASB. We will either have smooth sailing from this point on out or there is a nasty surprise waiting (on and off balance sheet) for bank investors in the near future. I invite readers to weigh in with their opinions.

image001.png

As you can see, we are just about where we were in 2007 in terms of average volatility. 

Rising fiscal deficits and pending bond maturities due in 2010 are paving the way for the next wave of the Pan-European Sovereign Debt Crisis - Supply, potentially in excess of demand, which portends higher yields and more onerous debt servicing at a time of record fiscal spending!

Please read the following in sequence if you have not already done so for the requisite background to this post:

1.        Can China Control the "Side-Effects" of its Stimulus-Led Growth? Let's Look at the Facts - Explains the potential fallout of the excessive fiscal stimulus in China

2.        The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

3.        What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect

4.        The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.

 

Expected higher fiscal deficit and bond maturities due in 2010 have increased the need for bond auction financing for all major European economies.

Amongst all major European economies, France and Italy have the highest roll over debt due for 2010 of €281,585 million and €243,586 million, respectively.

Rising fiscal deficits and pending bond maturities due in 2010 are paving the way for the next wave of the Pan-European Sovereign Debt Crisis - Supply, potentially in excess of demand, which portends higher yields and more onerous debt servicing at a time of record fiscal spending!

Please read the following in sequence if you have not already done so for the requisite background to this post:

1.        Can China Control the "Side-Effects" of its Stimulus-Led Growth? Let's Look at the Facts - Explains the potential fallout of the excessive fiscal stimulus in China

2.        The Coming Pan-European Sovereign Debt Crisis - introduces the crisis and identified it as a pan-European problem, not a localized one.

3.        What Country is Next in the Coming Pan-European Sovereign Debt Crisis? - illustrates the potential for the domino effect

4.        The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. - attempts to illustrate the highly interdependent weaknesses in Europe's sovereign nations can effect even the perceived "stronger" nations.

 

Expected higher fiscal deficit and bond maturities due in 2010 have increased the need for bond auction financing for all major European economies.

Amongst all major European economies, France and Italy have the highest roll over debt due for 2010 of €281,585 million and €243,586 million, respectively.

I really wonder what possesses people to believe these sales pitches, hook, line and sinker... Seriously, what the hell was this guy thinking??? From Bloomberg:

Dec. 17 (Bloomberg) -- For California Treasurer Bill Lockyer, the offer from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good to refuse.

If California were willing to forgo competitive bidding for a $4.5 billion bond offering, the banks promised more orders from individuals and a lower bill to the taxpayers. The firms insisted that by negotiating with them, the state would benefit from its special relationship with the Wall Street troika and wind up with what two underwriters called a salutary “buzz” to boost demand for the debt.

When the October offering failed to sell as planned, California was forced to accept 8 percent less money than it needed and to pay as much as $123 million more in interest than the banks said was sufficient for the market. And the threesome made $12.4 million on the deal, contributing to record bonuses in the securities industry a year after getting a total of $80 billion in a federal bailout.

“Just because someone earns a big wad of money doesn’t mean that they can do what they say they can do,” said Marilyn Cohen, who watched the sale unfold from Los Angeles as president of Envision Capital Management, which oversees $250 million in bonds for individuals. “And shame on the state if they were drinking that Kool-Aid.”

The California sale helped send the municipal-bond market to its worst month in a year. It ended a rally that had pushed borrowing costs for cities and states to a 42-year low, as measured by the Bond Buyer’s index of 20-year general obligation bonds.

 Mr. Lockyer, the next time someone promises you something, get it in writing, reviewed by competent counsel and independent financial advisors. Be sure to have the vendors supply a capital reserve to back up their promises. Most banks probably wouldn't do that, which should tell you something in and of itself.

Then there is "Goldman Sachs Driving Trucker YRC Into Bankruptcy, Teamsters' Hoffa Says":

I really wonder what possesses people to believe these sales pitches, hook, line and sinker... Seriously, what the hell was this guy thinking??? From Bloomberg:

Dec. 17 (Bloomberg) -- For California Treasurer Bill Lockyer, the offer from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. was too good to refuse.

If California were willing to forgo competitive bidding for a $4.5 billion bond offering, the banks promised more orders from individuals and a lower bill to the taxpayers. The firms insisted that by negotiating with them, the state would benefit from its special relationship with the Wall Street troika and wind up with what two underwriters called a salutary “buzz” to boost demand for the debt.

When the October offering failed to sell as planned, California was forced to accept 8 percent less money than it needed and to pay as much as $123 million more in interest than the banks said was sufficient for the market. And the threesome made $12.4 million on the deal, contributing to record bonuses in the securities industry a year after getting a total of $80 billion in a federal bailout.

“Just because someone earns a big wad of money doesn’t mean that they can do what they say they can do,” said Marilyn Cohen, who watched the sale unfold from Los Angeles as president of Envision Capital Management, which oversees $250 million in bonds for individuals. “And shame on the state if they were drinking that Kool-Aid.”

The California sale helped send the municipal-bond market to its worst month in a year. It ended a rally that had pushed borrowing costs for cities and states to a 42-year low, as measured by the Bond Buyer’s index of 20-year general obligation bonds.

 Mr. Lockyer, the next time someone promises you something, get it in writing, reviewed by competent counsel and independent financial advisors. Be sure to have the vendors supply a capital reserve to back up their promises. Most banks probably wouldn't do that, which should tell you something in and of itself.

Then there is "Goldman Sachs Driving Trucker YRC Into Bankruptcy, Teamsters' Hoffa Says":

Governments world over have issued guarantees and commitments to assure the world that they would not let any major counterparty to fail. This has created the desired impact in short term credit and lending markets, as well as the longer term corporate bond markets. It has also produced the effect that I anticipated, moral hazard (ex. the continued extreme risk taking at Goldman Sachs despite being backstopped by the US government - see The Goldman conspiracy theory is now no longer a theory) as well as the carry of corporate risk by central banks and governments in lieu of private investors.

Governments world over have issued guarantees and commitments to assure the world that they would not let any major counterparty to fail. This has created the desired impact in short term credit and lending markets, as well as the longer term corporate bond markets. It has also produced the effect that I anticipated, moral hazard (ex. the continued extreme risk taking at Goldman Sachs despite being backstopped by the US government - see The Goldman conspiracy theory is now no longer a theory) as well as the carry of corporate risk by central banks and governments in lieu of private investors.

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