Sunday Open Thread | 75 comments (75 topical, editorial, 0 hidden)

Re: Soros on Greece, Germany, eurozone (none / 1)

I would point out that what bonds are trading at in the aftermarket is a bit different than the price that Greece sold bonds at.

Two weeks ago Greece sold 5 billion euros worth of 7 year bonds at 5.9%.

https://news.fidelity.com/news/news.jhtml?articleid=201003291146RTRSNEWSCOMBINED_ATH005323_1&IMG =N&ccsource=rss-investing-stocks

So, the difference we see here is 5% for 3-year bond from Europe versus a 5.9% 7-year bond from the market. Longer-term bonds have higher rates so, it would seem to me, that Greece is not even getting a percentage point less than the market rate.

Of course, one could also argue that Greece's deal for bonds at that 5.9% rate is purely a result of implicit EU guarantees to its stability.

by Upstate NY on Sun Apr 11th, 2010 at 04:28:35 PM EST
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Re: Soros on Greece, Germany, eurozone (none / 0)

I haven't looked at the details - and I'm absolutely open to the idea that the EU is screwing Greece over - it seems to me that the 5% is a meaningful guarantee, because most of the descriptions of "Doomsday in Greece" have all been about the escalation of borrowing costs - which are now (for a while at least) pinned around 5%...

by Metatone (metatone [a|t] gmail (dot) com) on Sun Apr 11th, 2010 at 04:31:41 PM EST
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Re: Soros on Greece, Germany, eurozone (none / 0)

5% is a very good rate for Greece in this atmosphere.

Whether it will enable them to cut into their deficit is another story. That all depends on what they do in the market with this 5% peg. 40 billion from the EU and IMF at, say, 4.6% (3/4 EU loan at 5% and 1/4 IMF loan at 3.25%) may be offset by much higher loans at either 6 or 7% in the market. If Greece can sell at 6%, then the mix with the 4.6% will help them to slog through. But if they are selling at 7%, then the 4.6% may not be enough.

Other factors come into play, such as Greece's forecast uses 4.5% as the number to predict next year's deficit. Also, older Greek bonds from the pre-eurozone days are maturing. Wolfgang Munchau has stated that Greece's bond structure shows a healthy mix with a long average maturity at low rates and the bonds expiring shortly are at high rates.

We shall see.

by Upstate NY on Sun Apr 11th, 2010 at 04:39:33 PM EST
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Re: Soros on Greece, Germany, eurozone (none / 0)

One weird thing that I can't get my head around, a country is allowed to borrow 10x what it gives to the IMF.

If true, Greece should have given the IMF $10 billion about a decade ago.

I have no idea how that formula works but surely the amount given to the IMF should be a percentage of GDP and not an arbitrary "donation."

by Upstate NY on Sun Apr 11th, 2010 at 04:42:25 PM EST
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Re: Soros on Greece, Germany, eurozone (none / 0)

This is Munchau on the deal:

http://www.ft.com/cms/s/0/762c8ebc-4596-11df-9e46-00144feab49a.html

I wonder what he would say knowing the amount is for half of what he thought.

by Upstate NY on Sun Apr 11th, 2010 at 05:00:24 PM EST
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