Monday, January 25, 2010
Greece announced a 5-yr 8 billion euro deal today (as expected) – yesterday I called this a Hail Mary. Well, the Hail Mary worked! Books are closed, and the deal is well over subscribed (i.e., strong demand for the deal). Evidently, the talk is that there is natural demand for this product, via the rest of Europe, to shore up the value of the bonds over the near term.
But that’s it, because credit default swaps haven’t moved, remaining elevated well-above the Q4 2008 crisis point.
The credit-default swap (CDS) strips out the interest rate risk, leaving a measure of credit risk. Across the remaining PIIGS countries, CDS spreads in Ireland and Italy are relatively stable, while those of Portugal and Spain are seeing pressure in the wake of recent Greece developments.
Yesterday’s post highlighted the saving problem in parts of Europe (including the PIIGS above).We’ll see how this goes – but it appears that Greece has dodged the bullet for now.