Following the story late yesterday in the FT titled “Cracks in Greek bail-out” on the desire for some EU countries to impose a sharper haircut on Greek bondholders than is taking place with the current debt exchange, an EC spokesman said “As far as I’m aware, there is no such discussion within the Eurogroup, which is the relevant body to consider issues related to private sector involvement.” This spokesperson may not be aware but Germany will likely get what it wants at the end of the day with Greece and a German newspaper is reporting that Merkel told her fellow CDU politicians that a Greek default is a possibility and could come as early as this year. With respect to getting the newly constituted EFSF off the ground, Finland, a thorn in Greece’s side, approved their participation. Ireland continues to be the standout in the eyes of the market of troubled European countries as 5 yr CDS fell to the lowest since June and their 10 yr bond yield is below 8% for the 1st time since Dec ’10. Italian business confidence in Sept fell to the lowest since Feb ’10. In the US, refi’s apps are picking up in response to the last drop in mortgage rates. The MBA said refi’s rose 11.2% to the most since Nov ’10 while purchases were up just 2.6%.
