Quote of the Day:
We want Greece to stay in the euro … but I also say there can be no new Greek programme if agreement is not reached with the troika.
Angela Merkel
Macro Overview
The End Of The Endgame For Greece
- I thought we’d have a definitive end to the Greececrisis by now. This is the 59th minute of the eleventh hour. Creditors are holding out for a better deal still despite the vast amounts of pressure heaped upon them both by Greece’s government and every other government in the Eurozone – all of whom are keen to see the contagion threat firmly behind them.
- But here is the thing, many of the holders of Greek debt are, collectively, weighing up their own consequences. If they hold any amount of CDS – a sort of insurance protection against a credit event, like a default – they would get paid out on their insurance. So, in this case, private investors will calibrate the overall loss they would take on the position if Greece actually defaulted, if that value is higher than what the Greeks are offering them, why should they budge?
- A couple of days ago I noted that some prominent people were softening to the Greek default idea. Today ZeroHedge reports that the new Greek PM himself (the technocrat who was supposed to lubricate Greece through this crisis) has demanded a report on Default and Eurozone exit. On thing for sure, something as got to give… the worse case scenario is if market patience wears too thing and confidence in the entire political harmony of the Eurozone begins to crumble.
The Beginnning Of The Endgame For Portugal
- Reuters report that “Portugal has been discreetly sounding out advisers on options to restructure its debt”.
- Between Greece, Portugal and the rest of Europe, we are beginning to understand how this Eurozone mess will tranche itself out:
- The Senior Tranche is there for all to see – it comprises of the 4 AAA countries: Germany, Finland, Luxembourgand Netherlands. The same countries who met in Berlinto pat each other on the back and, presumably, cement their relationship – should those relationships come in useful later… if you see what I mean. Notice the obvious exception to this club Mr Sarkozy – see ZeroHedge article?
- The Junior Tranche is obvious too. Portugal and Greece have been firmly relegated to this bucket and show no signs of making it to Mezz. Italy, Spain and even Ireland are teetering on the edge… for now…
- Everybody else, including political heavyweights like France, are in the Mezzanine tranche. Where they will remain until they have proved themselves otherwise to the markets.
- Meanwhile, Portugal’s Prime Minister valiantly declared that Portugal’s debt was sustainable and similar to Ireland’s. Hmmm… perhaps it’s just the cynic in me but as soon as I read this the first thing that I thought was “Portugal’s debt is not sustainable and not similar to Ireland’s”. Not all PIIGS are the same, Ireland’s debt trades at considerably lower rates these days, the market is buying into the trajectory of Ireland’s austerity turn-around it would seem. Who are the big beneficiaries of rising Irish bonds? That’s right… the British banks – watch that sector.
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Market Overview
Zzzzz…
- Really not much to report in the market today. Perhaps everybody has a hangover after the Super Bowl – well done Giants.
- Big day tomorrow for earnings though (see below) – that should spice things up a bit.
- Chart of the Day today is the Irish 5 yr CDS Spread – that trend is looking good!
Chart of the Day
Ireland 5 yr CDS (Source: Bloomberg)
Events
Macro Events:
Update:
- Philippines CPI
Alerts:
- Nothing Significant
Corporate Events:
Results:
- ArcelorMittal [MT NA], BP [BP/ LN], Coca Cola [KO], GlaxoSmithKline [GSK LN], Kubota [6326 JT], Total [FP FP], UBS [UBSN VX], Vinci [DG FP], Walt Disney [DIS], Xstrata [XTA LN]
Dividends:
- Nothing Significant
Reading, Links:
Nothing Significant.
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Tags: CDS, Debt, Default, Economy, EU, Euro, Europe, Eurozone, France, Germany, Greece, Ireland, Italy, macro, Macroeconomic News, Merkel, PIIGS, Politics, Portugal, Sarkozy, Spain, TIPSTER, ZeroHedge




















