The chances of a Greek default in the next 5 years is 98%. It now costs $5.8 million upfront and $100,000/year to insure $10 million of Greek debt for 5 years. This is because the austerity plan is failing, the Germans refuse to give the Greeks more money, Greece’s budget gap widened 22 percent in the first 8 months of ’11 and their economy is shrinking. And, oh yeah, interest on 2-year Greek notes is almost 70%. Default is Greece’s best hope!
Tag Archives: Euro Crisis
Political Problems Pemeate
A lack of progress over the U.S. debt ceiling and intensifying contagion concerns in Europe (Portugal, Spain and Italy may go the way of Greece and Ireland) have triggered a further flight-to-safety; equity markets are generally in retreat and quality government bonds are rallying. The weak job numbers make the possibility of QE3 more likely; only 18K jobs were created last month as opposed to the usual 180K at this point in the cycle.
Greek Tragedy
The Greek 10-yr gov’t bond yield is 14.7%, 11.5% above comparable German bonds. The 2-yr Greek note is trading at 22.2%, 20.45 % above the German 2-yr note. The cost of insuring Greek sovereign bonds jumped to 1,422 basis points based on the Bloomberg London 5-yr credit default swap. These swap prices signal more than a 68% chance of a Greek debt default within 5 years! The Euro crisis continues.