Greece’s bond buyback has succeeded, after a fashion. There weren’t enough bids by the original deadline of Friday, but then the offer was extended and two things happened. First, Greece’s banks bowed to the inevitable and tendered all of their bonds, rather than just most of them. And second, the Greek government made its most explicit default threat yet:
When S&P downgraded Greece to Default on Wednesday, I thought it was a bit silly. After all, here’s a chart of the benchmark 2042 bond, since issue: although it’s trading at just about 30 cents on the dollar, that represents an all-time high, and the price has trebled since the end of May. When an issuer’s bonds were trading at 10.65 in May and are 30.63 today, that’s not the kind of price action you expect from a defaulting entity.
Charles Forelle has a very wonky post today under the headline “Greek Deal Could Weaken Private Bondholders”, which sounds a bit scary. Basically, there was a Clever Idea which got inserted into the documentation governing Greece’s new bonds, but now it seems clever only in retrospect.
So the Greece deal is done, and it has ended up looking much like Lee Buchheit said it would look, especially as regards the way that the official sector is dealing with the enormous amount of Greek debt it holds:
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.
There’s a good reason why the likes of Paul Krugman, Joe Weisenthal (twice), Cullen Roche, Ezra Klein, and everybody else are raving about George Soros’s analysis of what went wrong in the Eurozone: it’s really good. The big theme is that the European-unity project is a bubble, which could burst at any minute. But it’s the granular analysis in this 4,400-word speech which really makes it worth reading.
Mark Dow has found an astonishing set of results from a February opinion poll in Greece; it’s hard to imagine that Greek attitudes to Germany have improved since then. Here’s just one of the 13 slides:
One of the hardest questions to answer, when people ask about the European crisis in general and the Greek crisis in particular, is “why should we in the US care?” The simple answer is that well, this is an important part of the world, and it’s big news. But if you only care about news insofar as it directly effects the US, then the answer is harder.
The size of the run on Greek banks is not at all clear: while it seems that something on the order of €1 billion has left the banks of late, it’s less obvious whether that was over the course of one day, three days, or two weeks. The big picture, though, is unambiguous: