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S&P Announcement Weighs On Greek Bonds
The downgrade of the outlook of the U.S. credit rating by S&P drew suddenly the attention of markets from the intense speculation about the possibility of a restructuring of Greek debt.
However, it is highly doubtful whether the rating action will ease the pressure on Greek bond spreads and CDS. The announcement of S&P revealed what everyone knew but no one had admitted, that although the debt crisis is reigning in Greece, its source is located in the U.S., disputed as “risk free” market area for the first time since Lehman Brothers collapsed.
The expansion of risk area after the announcement of S&P will probably intensify the pressure on troubled economies of South European periphery, as banks and investment funds are called for adopting an even more cautious stance.
It should be noted that the pressure created in the U.S. is now exerted on European banks, especially German banks, which are “loaded” with U.S. debt.
But, as they are the same banks (along with French banks), which are loaded with more than €100b if Greek debt, it is unlikely to reduce the mobility and pressure towards Greek bonds.
Meanwhile, the intensity in the credit default swap market is triggered, hitting new highs recently.
Bond market analysts acknowledge that any new risk in the market worsens the position of those who are already in difficulty, and the rating action of S&P had a major impact to this direction, as shown by the reaction of international markets on Monday.
(capital.gr)
The downgrade of the outlook of the U.S. credit rating by S&P drew suddenly the attention of markets from the intense speculation about the possibility of a restructuring of Greek debt.
However, it is highly doubtful whether the rating action will ease the pressure on Greek bond spreads and CDS. The announcement of S&P revealed what everyone knew but no one had admitted, that although the debt crisis is reigning in Greece, its source is located in the U.S., disputed as “risk free” market area for the first time since Lehman Brothers collapsed.
The expansion of risk area after the announcement of S&P will probably intensify the pressure on troubled economies of South European periphery, as banks and investment funds are called for adopting an even more cautious stance.
It should be noted that the pressure created in the U.S. is now exerted on European banks, especially German banks, which are “loaded” with U.S. debt.
But, as they are the same banks (along with French banks), which are loaded with more than €100b if Greek debt, it is unlikely to reduce the mobility and pressure towards Greek bonds.
Meanwhile, the intensity in the credit default swap market is triggered, hitting new highs recently.
Bond market analysts acknowledge that any new risk in the market worsens the position of those who are already in difficulty, and the rating action of S&P had a major impact to this direction, as shown by the reaction of international markets on Monday.
(capital.gr)
