Skip to comments.Greece Sets 10 Year Bund Spread Level For When Total Pandemonium Breaks Out At 450 bps
Posted on 04/06/2010 8:40:19 PM PDT by Cheap_Hessian
Greek website bankingnews.gr reports that today's breach of 400 bps in spread to bunds on the 10 Year GGB is a very critical level, and that if spread widening continues, Greece "risks completely losing control" of its funding situation. The critical level in the 10 Year GGB spread to bunds beyond which all hell will break loose is 450 bps at which point "everyone will unload bonds and then control will be completely lost." (pardon our translation) Odd - no mention of CDS speculators having blown up Greece today: instead it is bond selling... How novel. The site also notes that while today's actions "should be a reasonable response and should reduce the spread, if that does not happen then Greece will completely lose control and very soon." This is likely the worst mistake that Greece could have done. By giving bond holders a bogey the target spread will become a self-fulfilling prophecy and will likely be breached in a matter of days. In addition, bankingnews.gr reports that 450 is a "milestone in the bond market as it represents a level beyond which the state will not be able to borrow."
(Excerpt) Read more at zerohedge.com ...
The German government's federal bond. The bund is issued to the public as a way for the German government to finance its spending. The bund is like the Treasury bonds in the U.S. They are government-backed instruments of the highest quality.
We’re next. With the dollar about to crash it makes sense to buy EVERYTHING that you think you might need for the next decade (except, maybe, food, as it is very tough to store). If you have the money, NOW is the time to buy new cars, appliances, and soap.
So, is BobL trading the BOBL?
No, but interesting. Thanks.
Idiotic article speaks poorly of “speculators”.....I’ve got news for this author....”speculators” don’t cause these problems.....crappy citizens who vote for crappy leaders cause these messes.....speculators trade on the facts....people don’t want to recognize the facts so they go after “speculators”.....how about going after crappy politicians who create these welfare states?
From the article
Yet what will a disclosure by Greece be without at least a little scapegoating. Sure enough: "While the spread widening was excessive, there is no plan or mechanism to prevent further widening. The hedge funds and U.S. investment banks have won the battle yesterday by forcing long-term investors to sell." Farewell Germany, old friend, hello America, new favorite scapegoater.
(looking up definition of bps....waiting....waiting)
Oh, bps = basis points = 0.01%. So the Greeks have to pay 4-4.5% more interest on their bonds than the Germans do.
I prefer to think of it as investing in precious metals: brass and lead.
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