Sell Greek bank stocks? Sell the Greek index? My point is that, in general, in any govt bond mkt, failing to deliver a bond is considered to be a bad and disruptive thing, both by the authorities and the mkt participants. Different mkts across the world address these issues in different ways*. The Greek mkt has been rather dysfunctional recently, with one particular mega fail last week. That's a very bad thing for dealers and the HDAT committee (half of the seats on which belong to dealers) decided that enough is enough. So they have, basically, instituted an auction mechanism for automatically covering all repo fails at the end of each day. * For example, in the US trsy mkt these days, for every day you fail during the first month, you will be automatically covered in repo at -3%. After a month, you will trigger a cash buy-in (i.e. your short position can be liquidated by the cpty at a price of their choice). Obviously, these are broad guidelines and the specifics will depend on the exact legal language in the agreements that govern your repo lines. Another example is the Japanese govt bond mkt (JGB), where you can't fail at all, period. If you do, you get a call from the authorities and are threatened with all sorts of dire consequences (loss of banking license, etc).
So in your opinion is this going to work? Or does it actually backfire and cause liquidity to dry up?
A few 'transparent' data about fails: http://newyorkfed.org/tmpg/tmpg_ficc_031610.pdf http://dtcc.com/products/cs/fixed_income_gsd/treasury_fails.php
My personal view, and keep in mind that I am often wrong, is that, once things settle down and everyone deals with their issues, it would actually be a positive for the mkt. If I were a dealer, I think I'd welcome this in the long run.
MNI "Some traders say this is a "technical tweak", merely introduced to stop repo failure and also encourage repo transactions with Greek banks after some banks pulled their repo lines earlier in the week."
Yes, I mean the US would never make shorting of certain financial stocks illegal or any other stock that petitioned to be included.
Hey Ghouly... http://www.zerohedge.com/article/greek-curve-goes-apeshit-bloomberg-reports-3-month-bid-213 Bloomberg Reports 3 Month Bid At 21.3%? Really? What the...
Is it ZH's job description to sit there staring at Greek bills, noticing every single tick in BBG, and crying "Wolf!" every time it looks interesting? For the record, I see a 6%/7% mkt (aggregate from a bunch of dealers; not great and it's a lot tighter on MTS) in the Jul Greek T-bill. I can send you a screenshot if you like, but this ZH malarkey is getting absurd.
ZH used to be great when they were focusing in delivering paid research for free online. Its a shame they changed, must have been the lawsuits