April 21, 2011
The clock is clearly ticking on Greece and Portugal’s default or severe restructuring, and the clock seems to be speeding up. Yesterday Greek 10-year yields rose to 14.75% and 2-year yields soared past 22%. If you think Greece is not going to default and force significant haircuts on its bondholders (including the ECB), you have a great opportunity to buy a 22% note that will pay off at par! Portuguese 10-years are at 9.28%; 2-years at 10.5% (see Chart below for the 2yr, click to enlarge). The Irish 2y and 10y are both over 10% as well.
This is starting to be an all-the-king’s horses situation. With all the powers that can be brought to bear on the problems, all of the ECB secondary market support, all of the rescue packages and promised rescue packages – and even after Spain and Portugal both successfully sold bonds overnight – these markets are in free-fall.
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