Endless Supply of Rabbits? Greece to Make April 9 IMF Repayment; Bond Market Unimpressed; Tsipras Heads to Russia

Greece to Make April 9 IMF Repayment

April 9th was one of the critical dates by which Greece was said to be out of cash. By now most expect these kinds of deadlines to come and go in belief the eurozone hat has an endless supply of rabbits.

Sure enough, Reuters reports Greece Says Ready to Make IMF Payment on April 9

Greece will repay a loan tranche to the IMF on time on April 9, its deputy finance minister said on Friday, seeking to quell fears of default after a flurry of contradictory statements on the issue in recent days.

Greece is fast running out of cash and its euro zone and International Monetary Fund lenders have frozen bailout aid until the new leftist-led government reaches agreement on a package of reforms.

That prompted the interior minister to suggest this week that Athens would prioritize wages and pensions over the roughly 450 million euro ($490 million) payment to the IMF, though the government denied that was its stance.

Euro zone officials then quoted Greece as saying it will run out of money on April 9, which the finance ministry denied.

"We strive to be able to pay our obligations on time," Dimitris Mardas told Greece's Skai TV. "We are ready to pay on April 9."

Adding to the confusion, German magazine Der Spiegel quoted a finance ministry general secretary, Nikos Theocharakis, as saying Greece would probably not pay next week's IMF tranche, prompting a further denial from the Greek finance ministry.

Bond Market Unimpressed

The bond market is unimpressed. Let's take a look at several durations.

Greece 10-Year Bond Yield



Greece 5-Year Bond Yield



Greece 2-Year Bond Yield



Notice the steep inversion in the yield curve. The 10-year yield is 11.91% while the 2-year yield is 23.57%.

This is a sign of default risk and the larger haircuts that shorter term durations will take vs. longer durations. Come in far enough and the bond prices are steep, but no longer inverted.

For example let's take a look at 3-month and six-month durations.

Greece 3-Month Bond Yield



Yield on the Greek 3-month bond is exceptionally high compared to the rest of the eurozone but at least it is not inverted compared to 10-year bonds.

However, the 3-month bond is inverted compared to the 6-month bond.

Greece 3-Month Bond Yield



Tsipras Heads To Moscow As IMF Withdraws Athens Staff

Zerohedge reports Tsipras Heads To Moscow As IMF Withdraws Athens Staff; Greek Default Risk Hits Post-Crisis High

Amid growing pressure from their 'Troika colleagues' with Eurogroup Chair Dijsselbloem noting there is "still a long way to go" on Greek proposals and The IMF withdrawing its staff in Athens; new prime minister Alexis Tsipras heads to Russia to meet with Putin early next week. As Kremlin spokesman, Dmitry Peskov noted - somewhat intriguingly - "Greece has not asked [Russia] for financial aid... yet," as Tsipras is expected to seek agreement for a 'road map' of initiatives on the political and economic levels. Greek default risk has resurged in the last few days to its highest since the last 'restructuring'...

Greek default risk hits post-crisis highs...

Odds of Default Surge

Back on January 28, Bloomberg stated Greece Credit Swaps Surge to Signal 70% Probability of Default. Odds have gone up since then.

Endless Supply of Rabbits?

Is there an endless supply of rabbits? I actually do not think so. Greece may not run out of money in April but it will run out of money by June in my estimation. That is less than three months away.

As I noted on February 11, Greece Needs Third Bailout to the tune of €53.8 Billion Needed.

I am convinced that Syriza will not agree to another bailout adding still more debt on top of the already unsustainable €323 billion pile. The extension granted to Greece runs out in June. In July a €3.5 billion payment is due the ECB, and in August another €3.2 billion payment is due the ECB.

Can Greece come up with €6.7 billion? I don't think so. All this extension did was give both sides more time to come up with an exit strategy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com