Greek spreads over German debt have contracted only 3 bp today, and are now at 3.26% over bunds from 3.29% yesterday. Seems like bond traders are not impressed with the details of the package for Greece that have leaked out so far.
The fact that in all likelihood that the package will require Greece to exhaust its ability to borrow in the market may, in fact, precipitate the very crisis the governments are trying to avoid.
Why lend to Greece when you can led to an EU-backed Greece? Start a crisis, trigger the support package, then lend to your hearts content with zero chance of default. The package merely delays the inevitable. The EU would be wiser to bite the bullet and come to Greece’s aide with an immediate lending package.
EUR/USD is consolidating in the 1.3355 area.
