The Markets and Greece: Variations on a Theme

New York Times
July 2, 2011

How worried are investors about Greece’s financial mess? Could it take a huge toll on Europe and upend the global recovery? A standard way to answer such questions is to turn to the financial markets, which are often thought to reflect and foreshadow the underlying health of the economy.

Yet in recent weeks, the stock, bond and currency markets have seemed to be painting different pictures about the severity of the threat.

Until last week, bond market investors were racing feverishly into 10-year Treasuries amid growing signs that Greece was on the brink of defaulting on its debt. The market calmed down last week, though, upon learning that the Greek government had agreed to make sharp spending cuts and would be receiving billions in debt relief from Europe.

More