GREEK BONDS STILL STRUGGLING
23 August 2010 by Cullen Roche
5 Comments
Despite unprecedented intervention by the ECB there has been a relentless move higher in Greek bond yields. While the ECB appears to be able to make a market in Greek government funding the market clearly remains wary of the future of the Greek economy It looks to me like the market isn’t sitting around waiting for the Greek bailout plan to fail. There is clear evidence that austerity is unlikely to solve all of Greece’s long-term problems and bond investors are demanding that they be paid for the excessive risks. As of Monday morning the cumulative probability of default stood at 52% – little changed from the week before, however, the 2 year and 10 year note are both heading north of 11%.
(Greek 10 year bonds)
Sure Greek debt is doing badly because the French and German bankers dumped those bonds onto the ECB, now they are probably buying Spanish debt with the proceeds of that bailout, later they will dump the Spanish debt receive another bailout and use that money to buy Portuguese or Irish debt this will continue until they make full circle and are once again buying Greek debt.
Its like a system
France is doing this and is in conflict with Germany about it because Germany agreed with Greece to hold all bonds for a 3 year period to prevent further outfall.
http://www.spiegel.de/international/europe/0,1518,697680,00.html
Hopefully the pension system in Greece is 90% invested in Greek bonds like Spain’s is in Spanish sovereign debt.
The Greek pension system is defacto owned by Goldmann Sachs, so you will have to ask Mr Blankfein where he invests the money.
It’s mostly a pay-as-you-go system from what I read
http://www.oecd-ilibrary.org/content/workingpaper/286670310381
Social Security doesn’t sound that bad now does it?