Tuesday update.. We have a deal, now bring on number 3

 Finally after extending discussions all night we have a 2nd Greek bailout package including Private sector involvement.Its much as expected with a tweak here or there and compromise from the EZ on rates. The level of IMF involvement is still to be decided and some kind of Troika police will be on sight ( What a bum posting that will be despite the weather). The € 130 billion was agreed a private haircut of 53.5% and the startling revelation that Greek debt will be 120.5% of GDP by 2020 up from 120%. They also issued a firm belief in fairies.The better news for Greeks was a lowering of the spread (over financing) to 1 1/2%, join the queue Ireland and Portugal.
Its fair to say that markets initial response was more relief ( without the rally which happened yesterday) with a very subdued response.Equities or the Euro little changed after attempting higher ground. In forex markets EUR/USD made it back to near 1.33 but has drifted back to 1.3250 where we sit. There remains good selling orders just over 1.33 and a good amount of stops above I understand.
As far as today goes no great insight I’m afraid. I don’t think any wave of confidence or failure to occur immediately although you can expect the rhetoric to be bullish.
My conclusion is that right now the EZ and Greece have bought some time, neither side ready for a default. However, I give it no chance of being the final deal required if default is to be avoided later,maybe months. The Greek electorate may have a view in April and public tensions will continue. The troika policing which will be permanent will not be popular to say the least. Greece is still expected to sell-off assets at a rate and price that seems impossible.As default is definitely still a possibility who would want to invest in Greek assets with the possibility they could still end up as Drachma rather than Euro assets.
Previous deals have been exposed before even the ink has dried. This one may be different but no doubt time will expose its or should we say Greece’s short comings
Also now the private sector deal is agreed you can expect the lawyers to begin their work. There will be at least a big attempt to get those CDSs (Credit Default Swaps) into play by some,so this will run for a while.

Headlines

  • Greece..The Deal… Financing of EUR130bln, debt/GDP to fall to 120.5 % by 2020 and a nominal private haircut of 53.5% and lowering of margin to 1.5%.
  • Greece.. Will aim to implement concept of absolute priority of debt payments in next two months ( Don’t quite understand what that means..tough luck later?)
  • IMF… Legarde expects the IMF to decide on their contribution in the second week of March
  • EU… EU commission will reinforce Greek task force in Athens ( Almost sounds like an army and maybe they will need one)
  • Equities.. Stocks in Europe open flat to a smidge lower. Jury out but the stock market moves today could lead the currencies
  • Forex.. EUR/USD little changed at 1.3250. elsewhere Ausie dollar was most active, having been marked up to AUD/USD 1.0775 sold off below 1.0690
  • The Yen remains weak at USD/JPY 79.75 and EUR/JPY 105.70 ( relative of course)

It seems that on Monday the Chinese decision to lower bank reserve requirements at the weekend was viewed positively. I feel that it could also be viewed as negative, showing concern as to what lies ahead. It was more reactive than proactive. We shall see what Chinese data emerges and MUST be watched.

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