‘Last resort’ is fast approaching

Highlighting the increasingly troubled situation in Greece, the yield curve spread between 2’s and 10’s is now negative. Greek 2 yr note yields are rising a whopping 114 bps to 7.83% while 10 yr yields are up 34 bps to 7.51%. Greek 5 yr CDS is up 35 bps to 448 bps and now exceeds Dubai and Iceland. Greek stocks are down almost 4%. A German official didn’t help the situation by saying that their stance hasn’t changed and they will only assist Greece as a last resort. Well, that may be fast approaching but it’s looking more likely that it will be an IMF bailout that will lead the way. While not officially announced, the action in the Yuan over the past two days seems to be hinting at an imminent move on the part of the PBOC to widen the renminbi trading band. Today the Yuan is rising to the highest since Oct ’09 vs the US$. Australia reported a strong but in line jobs report. If adjusted for US population size, they added 275k jobs.

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