Poker game, tipping point — take your pick of the metaphors to be applied to the chaos in Greek bonds on Thursday, as Greek-German bond yield spreads and both five and one-year Greek credit default swaps spiked.
As to the latest action on bond yield spreads, via Reuters:
RTRS – RPT – Greek/German debt spread jumps to to 456 bps
Greece one-year CDS has now breached 650bps (with mid-quotes in the range of 640 to 670 bps), having widened 175bps than the situation on Wednesday. As Markit note, the inverted curve is a ‘classic sign of credit distress’.
As for Greek five-year CDS, this chart courtesy of Markit on Thursday shows the damage (click to enlarge):
As the FT reported on Thursday, Greece’s one-year CDS profile now surpasses that of Hungary just prior to its request for IMF assistance in October 2008 — although we’d caution that correlation is not causation, analogies can be misleading, and so on.
Still, as Gary Jenkins of Evolution Securities argued in a note on Thursday, ahead of the morning’s plunge (emphasis ours, hat-tip to David Oakley):
In the poker game that has characterised this situation between the EU and the market, the last couple of days movements suggest that we may be getting close to the point where the market asks to see the EU’s hand. And if the provision of liquidity from the EU really does come at current market rates, then it may just delay the inevitable.
Well, let’s see what Greece’s government had to say about that — breaking on Thursday:
12:00 08Apr10 RTRS-GREEK GOVT SPOKESMAN SAYS GREECE DOES NOT NEED TO ACTIVATE EU/IMF AID PLAN FOR NOW
12:02 08Apr10 RTRS-GREEK GOVT SPOKESMAN SAYS EU SAFETY NET IS THERE TO SHOW GREECE NOT ALONE
12:04 08Apr10 RTRS-GREEK GOVT SPOKESMAN SAYS MOST IMPORTANT IS TO IMPLEMENT ECONOMIC MEASURES
12:05 08Apr10 RTRS-GREEK GOVT SPOKESMAN SAYS GREECE VULNERABLE TO SPECULATORS
Related links:
Capital flight squeezes Greek banks – FT
Greek out! – FT Alphaville