Opinion

Felix Salmon

CNBC graphic of the day, Greek bond yield edition

By Felix Salmon
June 11, 2012

martin.tiff

Martin Wolf appeared on CNBC today, which is never a good idea. Between all the swishing noises and flashing graphics, it was pretty hard to understand what he was saying — and in any case, the questions from Andrew Ross Sorkin were generally of the form “tell me what’s going to happen in the future”, rather than “analyze what we know about the present”. At one point Sorkin literally asked Wolf to “handicap the outcome” of the Greek election. Wolf is a fascinating and erudite man, and I’ve never had a conversation with him where I didn’t learn a lot. But maybe if I asked him that kind of question, it could be possible for me to walk away none the wiser about anything.

Ryan McCarthy picked up on one point that Wolf made: he said — or seemed to say — that a eurozone deposit guarantee scheme would not protect deposits against the risk of devaluation. Sorkin really should have pushed him on this, since it seems to me at least that the whole point of a eurozone deposit guarantee scheme would be to keep depositors whole in euro terms, even if their country leaves the euro and devalues. Even without such a scheme, there’s a strong case to be made that if and when Greece leaves the euro, the EU should essentially write a large check to Greek depositors, making up for any losses due to the drachmaization of their deposits. Because if the EU doesn’t do that, capital flight from the European periphery will go from bad to catastrophic.

But CNBC is a place for heat rather than light, so instead of an interesting conversation between two smart journalists, we got shown the graphic above, twice. It purports to show a real-time quote for the Greek 2-year bond, which currently seems to be yielding 349.152%. (I love the idea that they know this number to three decimal places.) According to the chart, the yield on this instrument has been rising steadily until now: there’s no indication that there was even a dip after the bond restructuring in –

Hang on a sec. Check out that x-axis! You can’t be expected to grok this in the amount of time that the chart appears on CNBC — just a couple of seconds. But the chart stops in March, when the restructuring took place and the Greek 2-year bond ceased to exist. No wonder the yield is “unch”!

CNBC has more than its fair share of meaningless graphics, but this one is especially stupid: it’s a chart of an instrument which ceased to exist three months ago, showing what the yield on that instrument did in the run-up to its default.

Of course, CNBC’s viewers can’t be expected to understand that. The one thing they will understand is the yield, which is shown at 350%. CNBC is sending a clear message, here, that Greek debt is about to default, and it’s using a made-up measure to do so. There’s no such thing as the Greek 2-year bond yield, but Bloomberg has done its best to come up with an approximation of what such a thing might be trading at — and their best estimation puts the Greek two-year benchmark at 8.98%. Which means that CNBC is only off by a factor of, oh, 340 percentage points. Well done that channel! In any case, here’s the clip.

Comments
4 comments so far | RSS Comments RSS

nice catch, Felix. utter ridiculousness from CNBC.

Posted by KidDynamite | Report as abusive
 

You note that “Even without such a scheme, there’s a strong case to be made that if and when Greece leaves the euro, the EU should essentially write a large check to Greek depositors, making up for any losses due to the drachmaization of their deposits.”

In this scenario, a country that leaves the EMU can devalue or default on its public debt, while ensuring that private citizens are not made worse off. Why would other countries not immediately accept a similar bargain, leaving Germany and the core to cover hundreds of billions or trillions in euro deposits?

Posted by Woj | Report as abusive
 

lol! Particularly this bit: “maybe if I asked him that kind of question, it could be possible for me to walk away none the wiser about anything.”

That is absolutely so true of CNBC, although I do have to say the European version isn’t quite as ‘in your face’ as the US version.

Posted by FifthDecade | Report as abusive
 

I was curious how Bloomberg came up with estimating the Greek 2-yr Note yield at 8.98%. When i checked their site i realized that you’re actually quoting the percent change between the yield on the last day of trading, 3/12, and the previous day as noted by the time stamp below the quote. Even their Chart shows the last point being on 3/12 with a value of 225%. So it seems CNBC was just showing a similar chart of the run-up to the default and wasn’t trying to imply that it was still trading. I’ve seen other sources showing the latest yield on 3/12 as high as 404%.

Posted by DataGuru | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •