World economy talk

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what took them so long?

the crisis began 3 years ago

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because they were expecting change?

or maybe something like [ame="http://www.youtube.com/watch?v=pt5VUhZODGg"]this[/ame]

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How are the companies who invested in the CDS doing?

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How are the companies who invested in the CDS doing?

i mentioned in a previous post that politicians wanna kill sovereign credit default swaps

the market is getting concerned

Greek deal may imperil sovereign CDS market | Reuters

(Reuters) - The future of the Credit Default Swap (CDS) market -- used to hedge against the risk of a country defaulting -- may be at risk if these derivative instruments do not pay out after this week's rescue deal for Greece.

Default Insurance Market Takes Hit - WSJ.com

A vast market in which banks, hedge funds and investors trade insurance against debt defaults got a jolt Thursday, sparking worries of new strains in the global financial system.

Under the broad deal reached this week to stem the euro-zone's financial crisis, holders of credit-default swaps on Greek government bonds aren't expected to receive any payout, even though a preliminary agreement between financial institutions and European policy makers would recognize just half the face value of some Greek debt.

The decision not to trigger the swaps raises questions about the value of the insurance-like contracts and exposes the limitations of the hedging strategies that banks and investors have come to rely on. The swaps are widely used by bondholders and major banks to defuse a wide range of risks, and by traders to bet on market trends. If the swaps don't pay out when bonds default, banks and funds that bought the insurance may face losses they thought they had hedged.

the ISDA will ultimately decide if a credit event has occurred

but before a decision, a market participant has to bring it up with the ISDA first

i checked the ISDA website. so far nobody has brought it up yet

this issue is not yet closed. the process hasnt even started yet

sooner or later somebody will bring it up

ISDA's EMEA DC members will then decide

so we wait

btw, who are the members of ISDA's EMEA DC?



some of them are bondholders that bought CDS and some of them are CDS sellers

so some of them want to be paid and some of them hope not to pay up

they will all vote for their self interest

this should be interesting

a bondholder who bought CDS should bring it up with the ISDA na to get the process started

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intervention

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italy 10 yr yield



that's despite the debt deal last week

not good

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intervention

Time to buy JPY again! Thanks BOJ!

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Papendreou is doing a pontious pilate. Passing the buck...

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ekathimerini.com | Sixth tranche from IMF in doubt

The sixth tranche of Greece’s bailout from the International Monetary Fund is now in doubt following the unexpected call by the government in Athens for a referendum on the October 27 eurozone deal.

The IMF, which was completely taken aback by the announcement, believes that the new climate of prolonged uncertainty renders the Greek debt unsustainable, according to sources.

Given the funding conditions in the IMF charter that require a clear horizon for the next 12 months, the share of the 8-billion-euro tranche that would come from the IMF cannot be disbursed.

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Papandreou is gonna get a earful later...It will an early winter in Cannes.

PARIS (Reuters) - French President Nicolas Sarkozy and German Chancellor Angela Merkel will hold an emergency meeting with Greece on Wednesday to push for a quick implementation of Athens' bailout deal, the "only solution" to its debt crisis, Sarkozy said on Tuesday.

"This announcement took the whole of Europe by surprise," Sarkozy said in a rare televised address on the steps of the Elysee palace in Paris.

"The plan ... is the only way to solve Greece's debt problem," he said after a lengthy meeting with his top ministers and the central bank governor to discuss the referendum decision.

Sarkozy said a hastily arranged meeting for Wednesday in the Riviera resort of Cannes with his German counterpart Angela Merkel, Greek Prime Minister George Papandreou, European Union and IMF officials would "examine the conditions under which the commitments made could be maintained."

Share prices of French banks and other lenders exposed to Greece and other weak euro zone countries slumped on Tuesday.

Societe Generale tumbled 16.2 percent and BNP Paribas and Credit Agricole fell more than 12 percent. They are among the most exposed to Greece through sovereign debt holdings and loans.

"We have just added fuel to the fire and we don't understand at all the decision of the Greek PM," said Marc Touati, chief economist at Assya Compagnie Financiere in Paris.

"If there is a referendum the 'no' will win. Greece is playing a suicidal game that could lead to its exit of the euro zone so there is fear on French banks, but also on (euro zone) states."

The Greek government's decision brought a sharp rebuke from a former industry minister and close ally of Sarkozy within his UMP ruling party, Christian Estrosi, who called the move "totally irresponsible."

"When we are in a crisis situation and others want to help you it is insulting to try to save one's skin rather than to face one's responsibilities," said Estrosi

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the austerity measures forced on them is very very unpopular

so Papandreou will let the people decide if they want to take the medicine or not

also decide if they still wanna stay in the EU

this threatens the EU project

if Greece can hold a referendum to decide to leave EU, other members can do the same

that scares the hell out of the EU powers

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Markets reaction in the red. Good for the bank's balance sheet, but bloated sovereign debts remain unchanged.

LONDON, Dec 21 (Reuters) - European shares fell on Wednesday in thin trade after investors booked profits from earlier session gains as hopes that banks would use the European Central Bank's three-year funding to buy peripheral debt waned, with Italian and Spanish yields rising.

Volume was low, exaggerating movements, and traders said while the 489 billion euros take-up by banks at the ECB offering would help ease banks' balance sheets, it was not a solution to the region's debt crisis and countries were still heavily indebted.

"Does it solve all the problems? Clearly not. Italy and Spain still have serious deficits," said David Coombs, fund manager at Rathbone Brothers, which has $23.85 billion under management.

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yes it's good for the banks

they borrow money from the ECB at 1% interest rate then buy sovereign bonds yielding far above 1%

they profit from the spread

-----

the big amount borrowed isnt exactly positive

it reflects the massive liquidity problem in euro banking system

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Hirap talaga when you live beyond your means. Either you give it up or someone will take away from you, both painful...

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Greece got bailout 1.0 coz it had leverage

if Greece defaulted it could bring down eurozone banks. the effect would be equivalent to Lehman bankruptcy or worse

the powers-that-be couldnt let that happen so they bailed out Greece

but since the ECB's 3-yr LTRO eurozone banks are no longer in danger of collapse

Greece default no longer seems so scary

the banks have enough liquidity to survive it

there will be another LTRO this month

Greece has no leverage now

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Greek parties face Monday EU bailout deadline | Reuters

ATHENS, Feb 6 (Reuters) - Greece's coalition parties must tell the European Union on Monday whether they accept the painful terms of a new bailout deal as EU patience wears thin with political dithering in Athens over implementing reforms.

Technocrat Prime Minister Lucas Papademos put on a brave face as he tried to get leaders of the three parties in his government on Sunday to sign off on the terms of a 130 billion euro ($170 billion) rescue, which Greece needs soon to avoid a chaotic debt default.

Papademos said in a statement the party chiefs - who may face angry voters in parliamentary polls as soon as April - had agreed measures including wage cuts and other reforms as part of spending cuts worth 1.5 percent of gross domestic product.

Greek unions plan 24-hour strike against austerity | Reuters

(Reuters) - Greece's two major labor unions plan a 24-hour strike on Tuesday against austerity measures and reforms demanded by international lenders in exchange for a new bailout package, union officials said on Sunday.

"We are planning a one-day strike on Tuesday," Ilias Iliopoulos, secretary general of public sector union ADEDY, told Reuters. "Despite our sacrifices and despite admitting that the policy mix is wrong, they still ask for more austerity."

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WTI $96+

Brent $116+

spread widens to $20

oil inventory buildup at Cushing (oil from Canada and the US midwest) putting downward pressure on WTI

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hmmm... role reversal

[ame=http://www.youtube.com/watch?v=XWVSn-xoBVk]Outsourced: India bails out US from jobless crisis - YouTube[/ame]

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S&P downgrades Spain banks

Spain economy in recession


News Headlines

Standard & Poor's (S&P) Ratings Services announced on Monday that it had lowered the credit rating of 16 Spanish banks. The downgrade came ahead of an announcement of Spain’s first quarter GDP figures, which showed the country had fallen back into recession.

Among the worst hit by the S&P downgrade was Santander [BNC-LN 393.50 -3.50 (-0.88%) ] and its core subsidiary Banco Espanol de Credito S.A, which were downgraded from A- to A-2, and A+ to A-1 respectively. Meanwhile, the ratings agency cut its rating on Santander’s senior debt to A- from A+.

S&P also lowered its rating on the bank’s non-deferrable subordinated and Tier 1 hybrid notes one notch and placed them on a negative outlook.

The ratings agency lowered its credit rating on Banco Bilbao Vizcaya Argentaria (BBVA) [BVA-LN 5.23 0.01 (+0.19%) ] to BBB+/A-2 from A/A-1 with a long term negative outlook. It also lowered its rating on BBVA's senior debt to BBB+ from A. S&P cut its rating on BBVA’s non-deferrable subordinated debt and Tier 1 hybrid notes by one notch and placed them on a negative outlook.

S&P said the negative outlooks on Santander and BBVA mirrored that on the long-term rating of Spain’s sovereign debt, which the ratings agency downgraded last week.

Official figures released on Monday showed the Spanish economy contracted by 0.3 percent in the first three months of the year, taking the country back into recession. The figure beat economists’ expectations which had forecast a contraction of 0.4 percent. The fall in output matched that of the final quarter of 2011.

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Australia central bank rate cut bigger than expected