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Posts Tagged ‘default’

2012/03/08: When is today not today? When it’s PSI participation results!

March 8, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Yes indeed, today is the deadline for the next European Sovereign Debt Crisis decision: PSI (Private Sector Involvement) decision on whether to participate in the ‘voluntary’ dilution of the value of their outstanding Greek bonds. Regardless of how that turns out, we must say it’s refreshing to finally actually have a bona fide deadline of any sort for what has been the otherwise amorphous European success in simply “kicking the can down the road.” And yet, in terms of its actual impact on the markets, it really isn’t actually, officially today that counts

…because the 20:00 GMT (15:00 EST; 14:00 CST) deadline for bondholders to decide is not the moment we will find out the actual results. Those will be announced Friday at 07:00 CET (Central European Time: 06:00 GMT; 01:00 EST; 00:00 CST.) While it is probably fair to allow some time to review the results after the formal deadline, this just shifts one more of the intensive late week influences we had highlighted at the top of the week for today into tomorrow into the last trading day of the week.

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2011/09/20: Operation ‘Twisted’ …Does Fed Matter When Risk Model Now Greece-On/Greece-Off? Does Greece?

September 20, 2011 3 comments

It seems an awful lot of attention has been focused on whether the Fed is going to either announce or actually initiate Operation Twist in its post-interest rate (non-)decision statement on Wednesday. Certainly there are some forms of ‘twist’ that matter. Chubby Checker helped destroy American social mores in the 1960’s with the dance. And who doesn’t like one near the end of a good suspense story?

By comparison the Fed’s plan to move some of its balance sheet from short-dated Treasury securities out into the 30-year Treasury bonds is likely to have about as much impact on the US economy as the QE2 liquidity infusion… which is to say, not much. And in this case it does not even provide that additional liquidity, which at least repaired portfolios through risk asset inflation.

It’s the macro-financial equivalent of distracting the masses with shiny objects. Not a single person who does not meet credit standards will get a loan, and no more than a very few businesses will create an additional job. And it holds certain deferred risks in the form of extra upward pressure on government borrowing yields once the economy actually turns up.

Much more impact will be felt from any Greek default, or the ability to once again avoid default (at least temporarily.) Everyone knows that is the driver for the current extreme volatility of equities, and government bonds’ resilient ‘haven’ bid for the past couple of months; recently joined by the US dollar. And even those uplifting “Greece-on” phases bring less and less weakness to government bonds (i.e. higher yields) for one good reason:

It’s the global economy!! Don’t take our word for it… ask the OECD.

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