Bond Market Rejects Greek Solution Already
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If the "Vienna-Style" Agreement between Trichet, Sarkozy, and Merkel was a genuine solution to the crisis in Greece, sovereign debt yields would be falling sharply across Europe.
Instead, yields in Portugal are up, and yields in Spain, Italy, and Ireland are only slightly lower.
Spain 10-Year Government Bond Yield Down .08 to 5.57%
Portugal 10-Year Government Bond Yield Up .04 to 10.91%
Italy 10-Year Government Bond Yield Down .03 to 4.82%
Ireland 10-Year Government Bond Yield Down .17 to 11.39%
Action in Greek 2-Year Bonds
After falling as "low" as 27.52% 2-year Greek bonds closed at 28.79%.
Market Laughs at "Solution"
The bond market laughs at the proposed solution to the Greek crisis, and so do I.
Please see Merkel Wimps Out, Agrees to Laughable "Voluntary" Solution to Mess in Greece; Four Things to Expect Shortly for details of the alleged "solution".
Four Things to Expect
- Expect the market to call another can-kicking bluff as early as next week.
- Expect more pompous foolery from Trichet and Sarkozy.
- Expect Merkel to take another well-deserved election pounding in September.
- The main thing to expect is for the market to start demanding involuntary haircuts on the debt of Portugal, Ireland, then Spain and Italy.
In the next phase of the crisis (which can happen as soon as Monday), expect to see yields shoot up in Spain and Italy.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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