A lack of a negative rather than a positive

The decision of a majority of the Greeks to in essence stay in the euro should be viewed as a lack of a negative rather than a positive. Greece is still left with two choices over the coming years and that is either default again or still eventually leave the euro. Their debt is just too overwhelming to see otherwise. While higher over the past two weeks, the Greek bond maturing in Feb 2023 is trading at just .17 on the euro. Putting Greece aside for a moment, strain in Spain and Italy is still intensifying as yields again move higher with the Spanish 10 yr yield above 7% and Italy above 6%. All the 100b euro Spanish bailout did was put a smile on the face of Spanish bank bondholders at the expense of Spanish taxpayers. Spanish CDS is now trading at 70 bps above Hungary. In Asia, India did not cut interest rates as many expected as “while growth in ’11-’12 has moderated significantly, headline inflation remains above levels consistent with sustainable growth.” The Sensex index closed down 1.4% in response. Ahead of the FOMC meeting this week where OT may get transferred over the MBS market, the avg 30 yr mortgage rate fell to a new record low of 3.64% on Friday according to bankrate.com.

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