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’On the prospects for Valencia
On Wednesday it transpired that the Spanish region of Valencia had delayed repaying Deutsche Bank a €123m debt by as much as a week.
According to the WSJ, a payment was only achieved in the end because Spain’s central government convinced an unnamed bank to step in with a vital short-term bridging loan.
Plotting a disorderly EZ break-up
Will the eurozone survive? If so, in what guise? If not, how will it be broken up and what might the consequences be?
These, among others, are some of the key questions currently occupying the minds of the financial great and good.
US CDS curve inverts for first time ever [updated]
Presenting, courtesy of Bloomberg, le chart du jour — an eye opening inversion of the US credit default swap curve:
That means, as Bloomberg eloquently put it, that it costs more to insure US Treasuries for one year than it does for five years,
$8,000bn speaks reserve currencies
The dollar is down, the euro is out, and SDRs are in. Results from UBS’s reserve management survey, canvassing institutions with a collective $8,000bn of assets:
Europe’s big box-ticking exercise
Interesting Q&A over at UBS earlier this week, concerning a voluntary roll-over of Greek bonds:
Question [from an emotional anonymous]: … this business of a voluntary versus a mandatory default seems to me kind of silly.
Notes from Athens
That’s one (very Acropolis Now) view from Greece, recently. (Photo via GreekSky).
Credit Suisse economist Giovanni Zanni has also been taking in the view from Greece — undertaking a trip to Athens to meet ‘key officials and experts.’ He’s collated his views into a seven-page note on Tuesday.
Squaring the Greek circle
The ratings agencies have left no one in any doubt where they stand on a voluntary rollover of Greek bonds.
Overnight from Reuters:
Fitch Ratings said on Tuesday that it would regard both a Greece sovereign debt swap and a rollover of maturities,
Greece and its most grim sovereign-bank loop
Ireland has made an unwelcome name for itself as a country where a state and financial system have become most uncomfortably entwined — the sovereign-bank loop on steroids, if you will.
Just think of that Emergency Liquidity Assistance (ELA) which sees the Irish central bank accepting far dodgier collateral in return for loans to banks than the European Central Bank’s own-brand of repos.
ESM panic! Subordination, restructuring, CDS, oh my!
Out, erm, yesterday. The term sheet for the ESM.
Details of the European Stability Mechanism, released on Tuesday, promptly sent European peripheral bond yields in a reverse tail spin. As we’ve noted before,
Around the eurozone in distorted CDS curves
They’ve gone all weirdly hump-shaped.
The below CDS curve charts are all from Markit, and the black and brown ones are the most recent, and the light grey is from three months ago — except for Greece.
A different way of looking at debt – and the developed world
Matt King — the god of credit strategy at Citigroup — has a block-buster note out on debt — tackling everything from balance sheet recessions to bubbles and busts.
Let’s start with the basics; what does Matt King reckon debt has to do with current market uncertainty? As it turns out — a lot.
Beyond Europe’s bailout fund — a Q&A
There are, to be honest, many reasons to run as fast as you can in the opposite direction of the eurozone’s peripheral sovereigns right now.
But there’s one longer-term factor that has hoved into view lately.
Ambac in critical condition
Ambac to the … umm … Earth’s core:
Shares in the troubled bond insurer dropped 40 per cent on Monday after the firm said it had decided not to make a scheduled interest rate payment due this November 1st.
When Anglo Irish bonds are liability managing
This week, the prospect of an Anglo Irish debt ‘liability management’ exercise burst into the market’s consciousness.
Anglo Irish anguish
The term is fixed-income code for what would basically a tender or exchange offer for existing Anglo subordinated debt — about €1.7bn of Lower Tier 2 bonds — which sit further down in the nationalised bank’s capital structure than senior debt.
Ireland’s subordinated bond ATTACK!
Ireland may have forsworn a default on senior bank bonds — but the subordinated stuff could turn out to be a rather different story.
On Thursday morning, Irish bank CDS shot sharply up on [UNCONFIRMED] chatter of an imminent “Allied Irish default”
Beware the Greeks, though not just yet
Here’s an interesting chart ripped from the CFR Geo-Graphics blog:
Notice anything strange?
The European Stabilization Mechanism was announced on May 11, the date represented by the blue bar in the middle of each time-to-maturity listed.
Sovereign default – Unnecessary, Undesirable, and Unlikely
The IMF recently published the final part of its sovereign risk trilogy.
Parts 1 and 2 were dark and quite frightening for investors, but Part 3 “Default in Today’s Advanced Economies: Unnecessary, Undesirable,
Germany’s defaulted gold bearer bond
Err, shouldn’t the fact that Germany is potentially facing a multi-billion dollar lawsuit for defaulted hyperinflation-era gold bearer bonds be triggering more news flow than just this Bloomberg story?
Germany must face a lawsuit over bonds that defaulted under Adolf Hitler in the 1930s,
In the event of a Greek default…
Following its ratings action on Portugal, S&P downgraded Greece by a full three notches on Tuesday to BB+/B — junk status. From the agency’s release:
· We have updated our assessment of the political,
Greek austerity with the truth
The Greek finance minister is supposed to have set his government a Herculean task of fiscal adjustment — to get his country out of its debt crisis, and away from the risk of default.
So what’s the following comment all about,
What happens when the world defaults?
The question one inevitably has to ask when all the risk in the world has been placed upon sovereign shoulders — who bails out the world when it defaults?
Davos delegates, as can be expected, are already working on a contingency.
Corporate markets head for indigestion
After the busiest start to any year for sovereign emerging-market debt, it’s corporate bond investors around the world who now seem to be heading for a massive case of indigestion, as ShortView noted last week.
Consulting the Greek CDS oracle
Forecasting the fate of nations has never been easy.
Take for example the story of King Croesus of Lydia, told by Greek historian Herodotus.
In trying to decide upon a campaign against the Persians,