Greek default inevitable/NFIB/Saudi stocks

Greek debt/CDS has inevitable restructuring/default written all over it as their 2 yr yield is up another 45 bps to 16.4%, the 10 yr yield is higher by 43 bps to 12.7% and 5 yr CDS is quoted at 1030-1040, a new record high. The market message has been clear for a while but Moody’s downgrade yesterday has more crystallized the possibility notwithstanding the existence of a Greek bailout package. For the sake of the Greeks and their punitive level of debt, it would actually be a good long term thing for them but at the short term expense of their bondholders. With Portugal’s 10 yr yield now hitting 7.59%, a bailout becomes more inevitable by the day. Irish debt is also under pressure. With this said though, if it stops here and the firewall around Spain and Italy can hold, the region will be able to financially deal. The Euro is finally responding lower vs the US$ off the highest level since last Nov.

The Feb NFIB small business optimism index rose .4 to 94.5, a touch below expectations but is at the best level since Dec ’07. Those that Plan to Hire rose to 5% from 3% while those planning on increasing cap ex was flat. Following intense commodity inflation pressures, those planning on Higher Selling Prices rose to 5% from -4% and that’s the 1st positive reading since Oct ’08. Those who Expect a Better Economy fell 1 pt but those that Expect Higher Sales rose 1 pt. Importantly for small businesses, those that saw Easing of Credit Conditions was unchanged at -10%.

Following the 20% decline in Saudi stocks since mid Feb, culminating with sharp declines on the 1st two days of March, the Saudi market has bounced 14% over the past 4 days with a 2.4% rise today. The Saudi government officially outlawed any demonstrations and was likely looking at the planned March 11th scheduled event as the main reason following some tiny protests. Qatar is up by more than 4%, the UAE by almost 3% and stocks in Kuwait and Jordan are stable.

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