The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Oh the rallies that bailouts, or the possibility of one, can engender. The Greek 10 yr bond yield is falling 40 bps after dropping 37 yesterday. 5 yr CDS is down 30 bps after narrowing 50 yesterday. Greek stocks are up 4%. Germany’s finance minister said help may be more than just loan guarantees. However, German officials sound like the punishment will be tough and may be more than just ‘go to your room.’ The German finance minister said “Greece, like other countries, has to experience the fact that if you don’t follow stability principles for a long time, you have to pay a price.” Another official said help would come only “under strict conditions and if the Greek government undertakes far reaching state reforms.” A spokesman for the FDP party said “there have to be structural changes to budget policy…We don’t help the alcoholic by giving him another bottle of schnapps.”

According to the DJ tape over the past 20 minutes, A German official is saying “sees no risk of any European country default,” “Not aware any concrete aid for Greece eyed,” “Greece is responsible to deal with debt woes,” “Amendments to Greek restructuring plan on summit agenda,” “Bailout ban exists, Berlin to stick to it,” “No German Government doubt that Greece can serve debt.” I know, just adds to the confusion of what is coming next but it seems to safe to say that some help will be given.

After reaching its highest level since Dec ’07 just 4 weeks ago at 53.4, the Bulls in the weekly Investors Intelligence data have fallen to 34.1 from 38.9 last week and is at the lowest level since April ’09. Those that expect a correction (which we’re obviously already in the midst of) rose to the highest level since 1983. Bears rose to 26.1 from 22.2 last week. ABC confidence rose 1 pt to -48 and is just shy of the one year average of -47. Even as the average 30 yr mortgage rate fell below 5% for the first time since mid Dec at 4.94%, the MBA said weekly purchases fell by 7% while refi’s were up just 1.4%.