Greece Sets 10 Year Bund Spread Level For When Total Pandemonium Breaks Out At 450 bps

ZeroHedge Blog ^ | April 6, 2010 | Tyler Durden

[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."

[Cheap_Hessian]

Definition of bund, from Investopedia:

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.

[BobL]

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.

[SAJ]

Just btw, BobL, do you know that your FR handle is EXACTLY the same as the German/Euro 5-year debt issue? Yes, it is (and the 2-year debt issue is, curiously, known as the 'Schatz', fyi).

So, is BobL trading the BOBL?

[KoRn]

"If you have the money, NOW is the time to buy new cars, appliances, and soap."

...And ammo.

[BobL]

No, but interesting. Thanks.

[There You Go Again]

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?

[Cheap_Hessian]

I doubt any reasonable person would blame speculators on Greece's or any of the other poorly-governed countries' problems. However, I do not see how the article blames speculators. It appears to me, the author used sarcasm, because Greek officials blamed speculators the last time this happened.

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.

[KarlInOhio]

400 to 450 bits per second? They need faster modems. My DSL in on the last ten feet of squirrel chewed wire and I still get 100,000 bps.

(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.

[Cheap_Hessian]

Yesterday's news for some background: Greece Rebels, Does Not Want IMF Participation In Bail Out; Fears IMF's "Intolerably Stringent Conditions"

[Verbosus]

Quote:
“...And ammo.”

I prefer to think of it as investing in precious metals: brass and lead.