Thursday, April 29, 2010
This Morning's Italian Bond Auction
However the panic has boosted talk about the Greek crisis into high gear, with much higher numbers over a period of years under discussion, and a promise of action within days.
Yesterday's crude inventories report showed higher stocks and much greater refinery utilization. YoY to date products supplied are up 0.8%. Comparing the last four weeks to the same period in 2009, gasoline supplied is up 3.2%. This is pretty good, economically speaking.
The economy in Europe is generally improving too. However there are some concerns as the game of "Bonds, bonds, who's got the bonds?" launches:
S&P cut Greece by three steps on April 27 to BB+, the highest non- investment grade, and said investors may recover as little as 30 percent of their initial outlays should the country reorganize its debt. It lowered Portugal two steps to A- the same day. It cut Spain one level to AA yesterday.The ECB is supposed to have collateral in investment grades, so the last downgrade kind of puts them in a tough spot. Spain's unemployment level has been unofficially reported over 20% in the first quarter of this year.
French banks have the biggest exposure to Greece among European lenders, accounting for $78.8 billion of the $193.1 billion of total claims European banks have on Greece, according to the Bank for International Settlements. They also have the second-largest claims on Portugal and Spain, after German banks, and are the biggest holders of Italian debt, BIS figures show.
I still do not see how the Greek problem can be resolved without a 25% haircut for creditors. I suppose that could come from governments, but it has to come from somewhere in order to get Greece in solvent territory. 30% would be much safer, but Greece would still be subprime for a year or two at best.