Greece saves the day!? A merger of Eurobank and Alpha Bank, the 2nd and 3rd largest banks in Greece will merge. Qatar, the 2nd biggest shareholder already in Alpha Bank, will add more capital to the combination. The Greek stock market is up more than 11% in response as Greek banks are up 30%. Greek debt however remains under pressure as we await still a resolution on the collateral issue that many now want from Greece in return for loans. The Greek 2 yr yield is back above 45% and the 1 yr is above 60% for the 1st time. Italian yields are at 2 week highs ahead of auctions tomorrow as the impact of the ECB purchases wane with the reduced size of daily buys. While the ECB continues to purchase Italian and Spanish debt, the market is playing a game of chicken with them knowing that once the purchases end, yields are going right back up again. All Asian stocks rallied too except China where the Shanghai index responded negatively to Friday’s move on the part of the PBOC to increase the amount of bank assets subject to the 21.5% reserve requirement ratio. The Yuan also moved to a new high.
