Are Greek machinations all that important now, or is the market already moving on to Spain? Even if Greece stays in, not sure what that really solves. It's just more "can kicking," and not even all that far down the road -- like less than half a block.
Yeah I would personally expect a New Democracy win to be a sell-the-news event. Many more elements seem to be in play now: global recession/forlorn decoupling hopes, cessation of margin expansion in U.S. equities and maxing out the presently established limits of policy support. Sort of a perfect storm of short, medium and long-term factors.
Greece may not even make it to the June 17 elections. Spain is in full-scale economic implosion and financial panic. Stubborness and politics are the only things preventing a massive ECB response at this time. My guess is the ECB (and, let's face it, the Fed) don't want to help out with Spain because it will also throw a lifeline to Greece. If Greece somehow makes it to June 17 and then votes in a way displeasing to Brussels, the markets will be in full panic mode on Sunday evening and the central banks will step in then. Trouble is, I don't know if the world will make it to June 17.
with the German short rates where there are what do you think about outright shorting some Schatz futures? (or maybe on a relative basis to 2yr tsy?) risk-wise I can imagine that nominal rates go slightly negative from here as the fear of euro uncontrolled decommissioning may make people pay for a privilege of owning portion of a hard working German taxpayer. but the risks of that are certainly less than high imo. on top of that all that crap about Eurobonds should ultimately put a pressure on German yield in any case. would like to hear some opinion on this - especially from the Rates guys... p.s. of course i am short already
In my view the panic have only began. Tons of solutions to EU problems require high levels of panic to get politicians to move, so I don't want to be short a safe haven. Also I wouldn't expect 2y ggb to decline much on eurobonds, the ECB will be at 1% or lower for a long-time. 30y could be affected but there is the panic factor going in the other direction
ok ok. so what do you see here as an downside risk (in bps) for Schatz yield given the current levels? also, technically the price looks weak...though of course on any medium/long term indicator it is as a bullish chart...
you mean how low negative yields can go?I'm not sure, probably pretty darn low. This is an unique situation due the redenomination risk. Usually people won't buy bonds at negative yields because you can just keep cash in the mattress. With redenomination risk the game changes
Negative yield on German paper doesn't mean a lot. Embedded in their value is a call option on redenomination. Paulson is short Bunds (hope he's still not taking investing advice from Greenspan).
huh? is that all I get here? some snippets from the Bild? we extensively discussed re-denomination stuff on this thread some 6 months ago...and to my frustration on several pages. I was expecting some comments on relative value, e.g. curve trading (dv01 or par weighted), UST/GGB trading, rates/equity etc...not something like "if there is an Armagedon you will lose money"...somehow I know that and put some hedges on... personally I believe that zero nominal bound (+/- few bps) is not that easy to break unless a full panic mode is in...and even with panic it has never happened before afaik...of course never say never I already feel much better in my position...it does not look like a crowded trade.
"More than half, or 52.4 percent, said they should stay in the euro if they were forced to accept the current austerity measures accompanying the bailout while 44.5 percent said they shouldnât." http://www.bloomberg.com/news/2012-05-29/greek-opinion-poll-shows-majority-want-revised-terms.html Almost half of the Greeks would drop the EUR if they had to do more austerity. Explains a lot of the support behind the no bailout parties