The price of insurance against a Greek default within 5 years is now approaching the levels of Venezuela and Argentina and their 2 yr bond yield, whose holders will suffer in any debt restructuring, is rising another 155 bps to 14.7%. Greek 1 yr CDS is already priced above those two countries and now Greek 5 yr CDS is at 730 bps vs Venezuela at 820 and Argentina at 830. The pain also continues to spread to the other highly leveraged European countries and European stocks are down as a result. Spain and Portugal CDS are at record highs. The fear of a debt haircut has European banks under pressure. The other spot of focus, China, remains under pressure in response to the property tightening steps being taken. The Shanghai index fell 2% and is now at the lowest level since Oct ’09. It was China that brought the economy off its knees in early ’09 and their market weakness should not be ignored. Copper is at a one month low in response.
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