it's economy is collapsing in front of our very eyes.
"And so the Greek funding crisis shifts to a liquidity crisis yet again. Bankingnews.gr reports that Commerzbank, among many others, is now pulling
its repos with Greek banks, essentially killing liquidity in the entire financial system. Cue Lehman Brothers and Sunday CDS trading. At least it's
not Friday so OTC traders don't have to worry they will be pulled from their Hamptons retreat. The Greek website is reporting that according to
sources, Commerzbank which is one of the biggest repo counterparties to Greek institutions, was dumping bonds in yesterday's sell off. Not only that,
but it is now pulling repos, in essence starting a cascade of asset liquidation, in which banks, already experiencing a depositor run, will be forced
to sell assets at any prices they can get just to fund their operations for one extra day.
A Google Translated version of the Bankingnews piece:
According to information Commerzbank was concerned about the Greek bonds accepted as guarantees of Greek bonds. Commerzbank has provided some
liquidity to Greek banks are more concerned about the Greek bonds. Based on a reliable source in the recent past, foreign banks have applied to
withdraw repo with Greek banks even offer powerful bonus.
The piece concludes:
Foreigners do not want to have in their portfolios Greek bonds. It is now clear. "
Yes Camile, the bond market DOES rule the world.
"Greek Curve Pancakes, 6 Month GGB Approaches 7%
Submitted by Tyler Durden on 04/07/2010 09:50 -0500
Ben Bernanke Failed Auction Greece Trade Balance
The curve below indicates that bond investors now believe that Greece will likely default in under 6 months, or at least the EMU will realize that
Greece is a lost cause and cut it off, despite all rhetoric to the opposite. Actually, with the 3 month trading at a mindblowing 4%+, which we are
fairly confident is a record for any country, let alone a EU and EMU member, one can claim that the country will not see July in its current political
form. The 3M-6M spread of nearly 300 bps is an all time record for a developed country. Past the 6M point, you can see all the way to the Pacific.
Note the curve shift from April 2009, when the 3M was trading at just over 1%. At this point the only question is whether the 3 Month will join the
other points on the curve in the 7% ballpark.
We believe the sequence of next steps is now as follows:
1) Failed auction for Greece
2) Euro drops to sub $1.30
3) EU effectively isolates Greece and takes it out of the EMU in practive if not in theory
4) Euro tumbles to $1.15
5) Bernanke realizes the implications of a surging dollar for the US trade balance, and reinstates QE, cranks up the printing presses, sending the
dollar plunging and the euro surging back to the $1.40 level"