Thursday, March 04, 2010
Man, this Greek saga (myth? legend?) just rumbles on and on and on, doesn't it? The last 24 hours has seen a raft of developments, from
a) yet another austerity package announcement (insert joke about the newly Spartan lifestyle of Greek civil servants here.)
b) The IMF (Greece's future partner in reform) welcomed the announcement.
c) So did Moody's, but they also said Greece still needs to show that it can raise funds in the capital markets.
d) The ECB's Nowotny said that it was "unacceptable" that Greece's fate (at least in terms of collateral eligibility at the ECB window) was in the hands of one ratings agency. (The phrase "don't shoot the messenger" springs to mind here.) In any event, rumours have begun to swirl that the ECB will start issuing its own ratings to member sovereigns. Somehow, Macro Man suspects that Greece will sneak in under the "tenderable" bar.
e) The authorities have launched a probe into sovereign CDS, with some reports suggesting that they would ban naked ownership of protection.
f) Quelle surprise! Greece announced the launch of a new 10 year issue this morning.
Whew! That's a lot to digest...and we still have the ECB announcement/press conference today, where punters will want to see whether the bank returns to competitive tenders on its refi ops. Lost in all the kerfuffle about Greece is that, despite the veritable
Everest Olympus of negative headlines over the past several weeks, that (in)famous Greek 5 year issue is trading above par.
Still, Macro Man wonders if demand for the new issue will be quite as strong as that for the 5 year, given the extraordinary number of Maalox moments that owners of the latter have had to endure. Still, the prospect of a ban on naked ownership of protection could generate a bit of demand for fresh Greek paper; 'twill be interesting to see if the indicative spread (current mid swaps plus 310) narrows as the book builds.
After all, it's not exactly like fixed income markets are trading what Macro Man would call "sensibly." 10 year swap spreads, a trade that looks right on so many levels, is performing horribly on the only one that matters: actual market pricing. Perhaps it's the weight of positioning or perhaps it's simply a dearth of convexity hedging; either way, it's looking depressingly like these puppies have a date with a negative destiny.
Macro Man thinks they should still work in the long run, but hey- you know what they say about that. At the very least, the trade has turned into a marathon: a test of endurance and stamina instead of a measure of quick-twitch speed.
Speaking of painful ordeals, health care is now a banned topic, except as it impacts financial market pricing. There is really no point having (or in my case, hosting) a debate in which a significant portion of the participants essentially stick their fingers in their ears, close their eyes, and shout "the government are morons so there's no point even trying to change anything!!!"
They are of course welcome to that opinion, and should they wish to express that view, they should feel free to visit the appropriate venue to vent. But after another day of being told "ooh, you Europeans just don't understand anything" by people whose idea of exotic travel is a visit to Bob's Country Bunker, I've had enough.
Off topic health care posts now incur the risk of deletion.