Dubai, Greece remain under pressure but US$ doesn’t benefit
The two sovereign problem children remain under pressure this morning. Dubai’s stock market fell another 6.4% and is down 27% over the past 2 1/2 weeks. Greece is down 2% and their 10 yr bond yield is spiking another 16 bps to 5.50%, up 10% in 3 days. The Finance Minister in Greece said there is “absolutely…no risk of default…as we signal that the situation is coming under control.” The US$ index though is lower and it’s helping to boost the futures. ABC confidence fell 2 pts to -47, matching a one month low as the State of Economy component fell to a 3 month low. The MBA said refi’s rose 11.1% on the week to a 2 month high while purchases were up 4% to a 5 week high. Stock market sentiment remains a bit confusing as measured by the weekly II data. Those bulls expecting a correction rose to the highest level since March ’92 but outright bears fell to the lowest since June ’03. The 10 yr note auction will be the highlight of the day.
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December 9th, 2009 at 12:47 pm
Greek 10-year bonds yielding 5.50%, while CDS “protection” costs an astronomical 236 bps. Something doesn’t make sense.
IMO, the cost of “protection” would be even higher if there was a real chance of your CDS counter-party actually paying you in the event of a sovereign default.
The 5.50% yield on a bond where the only question is the timing of the default is an even bigger joke.
Another excellent example of ongoing, central-bank sponsored under-pricing of risk. Insane.
December 9th, 2009 at 7:47 pm
“Dubai, Greece remain under pressure but US$ doesn’t benefit” As McEnroe would say, “you can’t be serious”!!
http://www.marketwatch.com/story/dollar-slips-against-euro-yen-in-asian-trading-2009-12-09