Reprofiling and Stagflating

The head of the euro zone finance ministers, Jean-Claude Junker, has introduced a new word in the lexicon of credit markets and debt restructuring and its called “reprofiling.” It seems to be the politically correct way of saying “extend maturities” and it’s what the EU seems to be leaning towards with Greece. If it occurs, European banks won’t have to write down their sovereign holdings that are currently held in their hold to maturity book and CDS may not be triggered. Greece did sell 3 month paper at a yield of 4.06%, 4 bps below the same maturity sold last month. UK CPI rose 4.5% y/o/y, the 3rd highest reading since 1992 and was above expectations of 4.1% and clearly shows that the UK economy is officially stagflating. The Germans feel good today but have an uncertain outlook going forward. The ZEW economic confidence figure in the 6 month outlook fell to a 5 month low but current conditions rose to the highest ever, dating back to 1991. In Asia, Vietnam raised rates again by 100 bps to 15% and India’s stock market fell to an 8 week low as they struggle with inflation and rate hikes to deal with it. In the US, AAA said gasoline prices have fallen .04 over the past few days.

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