World economy talk

[uls]

here's the Greece contagion i was talking about in an earlier post

EU banks struggle in lending markets
http://www.ft.com/cms/s/0/e8c79b0c-5...44feab49a.html

Many European banks have become shut out of the international lending markets because of continuing concerns over Greece, sparking fears that some could collapse as they run out of cash.

Greek and Portuguese banks cannot borrow in the international money markets, while weaker European banks are also struggling to raise money as fears of counterparty risk have grown sharply.

Even French and German banks have faced problems raising money because of their exposure to Greek sovereign debt. Barclays Capital estimates French and German banks hold almost €40bn in Greek bonds.

Greek banks have been shut out of the money markets since the start of the year, but in recent weeks this has spread to Portugal.

German, French and Spanish banks have had to pay higher premiums for short-term debt. There is a reluctance to lend to Spanish banks because, like Greece and Portugal, it is a peripheral eurozone economy with high debt.

The Greek crisis has also led to a big jump in overnight lending, which is considered almost risk-free, while lending beyond a week has fallen sharply in yet another sign of worries over counterparty risk.

who the hell is gonna lend money to a bank that's holding Greece debt?

the solution:

ECB Scraps Greek Debt Collateral Rules Indefinitely
http://preview.bloomberg.com/news/20...r-notice-.html

The European Central Bank said it will accept all Greek government debt as collateral when lending to banks, indefinitely suspending minimum credit-rating thresholds to support a 110 billion-euro ($145 billion) bailout of the debt-strapped nation.

so that means any EU bank that holds Greece debt can use the debt as collateral to borrow money from the ECB (no matter how low the rating on the debt is, the ECB will accept it, making the ratings agencies totally irrelevant)

so EU banks that need money don't have to liquidate

they can go to the ECB

--

update:

Update: Orphanides: Minimum Rating Suspension Greece-Specific
http://imarketnews.com/node/12762

NICOSIA, Cyprus (MNI) - The European Central Bank's decision to suspend minimum rating requirements for collateral eligibility is limited to Greece, and the subject has not been broached with respect to any other Eurozone country, ECB Governing Council member Anathasios Orphanides said here Monday.

it only applies to Greece banks

[tidus1203]

The ECB reminds me of how the Fed swallowed all the trash back during the height of the Lehman collapse. But this one is more on sovereign debt rather than corporate debt...

[uls]

EUR/USD


--

something isnt working

Greece CDS back above 700bps

not only that,

Spain, Ireland, Portugal, Italy cost of protection also going up fast

[uls]

contagion is spreading

the market pushed Greece to the edge and forced it to activate the IMF-EU loan

now the market is pushing the other PIIGS

here's a graphic that shows how BIG the debt problem is in the EU



that 3-yr 110B euro IMF-EU loan for Greece is tiny when you look at the grand scheme of things

[tidus1203]

Bailout will not work, IMO Greece need to sit down with its creditors and negotiate a restructure Mexico style! Bailouts will not work, kailangan meron na talagang debt forgiveness na ilagay sa table kung wala halos impossible without social unrest big time in Greece...

[uls]

This is Sparta





^^

Giant banners protesting Greece's austerity measures hang near the Parthenon on Acropolis hill in Athens early May 4, 2010. A group of demonstrators from Greece's communist party, KKE, staged the protest atop the Acropolis as Athens braced for a 48-hour nationwide strike by civil servants which would also include the shutdown of travel services. REUTERS/Pascal Rossignol

[uls]

massive flight to safety

USD index


10 yr US treasury yield


30 yr US treasury yield


gold selling-off, flight to USD cash

[Monseratto]

Is the bailout for Greece really meant to fix it's finances or just to pay off the banks holding to debt papers? Euro below 1.30 dollar.

[uls]

the loan to Greece is to allow Greece to pay maturing debt

so it's an indirect way of bailing out Greece debtholders

like the USG bailing out AIG so AIG can pay Goldman and other banks

[Monseratto]

So Greece is taking in debt to pay off debt, a bottomless pit. AIG can just sell off/downsize assets, while a sovereign country can't do that. Is the Acropolis for sale?

[Horsepower]

Question for the money wiz:

A friend wants to know what he can do with $40,000 that isn't his but was entrusted to him for a later expense (in a year or two) so that it'll earn max interest in short periods of time?

A. The owner of the money isn't interested with the interest.
B. My friend has buffer cash in pesos to spend for the expenses of the money's owner.
C. My friend can add more or less $10,000 to the $40,000.

My friend would like to extend his thanks in advance.

[tidus1203]

Stay cash! I hate this market right now so volatile... I always love trending markets so ako iwas pusoy ako dito sa market na to... Buying AUD might work given its uptrend in interest rates but that is as far as I am willing to go... Buying other assets can make your hearbeat run very very fast short of a heartattack! Oil anyone? $86 to $82 in like half a day!

[uls]

So Greece is taking in debt to pay off debt, a bottomless pit. AIG can just sell off/downsize assets, while a sovereign country can't do that. Is the Acropolis for sale?

yep, borrow money to pay debt, then borrow again to pay again

Greece has been doing that for years

they were always able to roll over debt

there was always demand for Greece debt, borrowing cost was low

times were good

but the party can't go on forever

the market began to see the unsustainability of it

Greece govt tax revenues were pathetic (Greeks hate paying taxes)

the market started to demand higher yield

everytime Greece went to the bond market to borrow money, the cost of the new money went up

Greece had to borrow money at higher cost everytime it needed money to pay debt

(borrow at higher interest rate to pay larger amount, borrow again at even higher interest rate to pay even larger amount, and so on)

it's totally unsustainable

Greece finally gave up and requested activation of the IMF-EU loan

the IMF-EU interest rate for Greece is much lower that what the market demands

in return, IMF-EU demands the Greece govt cut spending drastically

[Monseratto]

EUR/USD


--

Markets still heading south, Dow opened in the red.

Moody's warns Portugal of possible debt downgrade
Moody's warns of possible Portuguese credit rating downgrade as country raises euro500 billion

http://finance.yahoo.com/news/Moodys...&asset=&ccode=

[uls]

EUR/USD hit a low of 1.2803

now back up a bit

---

Greece CDS above 800, Portugal CDS above 400

---

NYMEX crude $80

[tidus1203]

Hahahaha kaka taas lang presyo ng gasolina kanina mukang rollback nanaman very soon...

EUR/USD is very tempting to go long on, when you have violent drops like today (over 300 pips) a rebound is definitely coming...

[uls]

A friend wants to know what he can do with $40,000 that isn't his but was entrusted to him for a later expense (in a year or two) so that it'll earn max interest in short periods of time?

A. The owner of the money isn't interested with the interest.
B. My friend has buffer cash in pesos to spend for the expenses of the money's owner.
C. My friend can add more or less $10,000 to the $40,000.

My friend would like to extend his thanks in advance.

lagay niya sa dollar denominated RP bonds

[uls]

speaking of RP bonds

ASIA G3 BOND OUTLOOK: Philippine Bonds Fall On Election Fears
http://www.nasdaq.com/aspx/stock-mar...election-fears

SINGAPORE -(Dow Jones)- With just a few days left before May 10 national elections, the Philippine government's dollar-denominated bonds are trading weaker and investors are buying default insurance to price in growing political risk.

With politics rather than economics currently taking center stage in the Southeast Asian archipelago, the outcome of the country's first nationwide computerized vote will dictate whether Philippine sovereigns--a benchmark for Asian high-yield bonds--will uncharacteristically underperform the rest of the region.

higher CDS

By Wednesday morning, the price of long-dated Philippine sovereign bonds was down by as much as 1.5 points. Credit default swaps on Philippine five-year sovereign debt were trading at spreads of 185-191 basis points, up around 15 basis points from Tuesday.

[Monseratto]

Euro down US$ 1.2819. Dollar strength causing oil to drop violently. Been a while since it was below US$ 80/bbl.

[uls]

EUR/USD falls below 1.28



from dailyfx:

http://www.dailyfx.com/forex/fundame...ent_05_06.html

The level of confidence in the Euro is staggeringly low, and European officials will need to do something to offer some form of support and reassurance in the coming hours, otherwise, there is a very real risk to continued depreciation. The ECB is set to meet later in the European session at 11:15GMT, and while it is more than widely anticipated that the central bank will leave rates on hold at 1.00%, all eyes will be on the post-decision Trichet press conference, which is sure to attract more than the usual amount of listeners.