Word is that Greece has 58 per cent of private sector participants signed up to the debt swap deal so far, which at the very least means the Greek government has the numbers it needs to activate collective action clauses – if they need to. That said, the IIF and some major bond holders have all expressed confidence that Greece will get over 75 per cent participation. If on the other hand they don’t and then have to activate the CDSs? No one really knows what the market impact will be. Theoretically it should be nothing, but history has shown this isn’t the case and contagion fears have often shot up. But my gut feel now is that it might pass without incident, a bit of risk for sure, but not the carnage that we would have seen even last year. That’s largely because I think market psychology has changed. You can only cry wolf so many times and there is already considerable evidence of Greek fatigue.
As it is for last night, the euro bounced around (70 pip range) but ended little changed at 1.3131. European stocks were then higher with the DAX up 0.6 per cent, the CAC up 0.9 per cent and the FTSE 0.4 per cent higher. Reports in the paper and newswires suggest this is because of the new pledges and also because of the ADP employment report, which showed jobs growth of 216,000.
It’s all positive don’t get me wrong, but the pledge news isn’t new and the ADP result came in as expected. It’s not even a great survey. Yesterday’s moves were inexplicably large – yes inexplicably – and this is just a very modest correction I think. So across the Atlantic, the S&P500 is up about 0.6 per cent with financials, industrial s and consumer services the main out-performers, although all sectors other than utilities look to be higher at this stage. The Dow futures is currently 83 points higher 12844, the Nasdaq futures is up 0.8% while the S & P 500 is 0.4% higher
On the debt side, US treasuries sold modestly with the yield on the 10-year about 1 basis point higher at 1.967 per cent. The 5-year was also 1 basis point higher (0.84 per cent and the 2-year was almost 3 basis points higher at 0.3 per cent.
A Wall Street Journal report suggested that Bernanke’s was itching to print more money. You can’t keep this guy away from the printing press for too long In any case the WSJ suggests the Fed is considering a number of QE approaches, including operation twist mark II renamed to “Sterilization “
The Aussie futures then were mixed, down a tic or so.
Elsewhere gold climbed $10 to $1685, Crude was 1.6 per cent higher on WTI ($106.4), while Brent was 1.9 per cent to $124.32.
The Australian dollar was otherwise little changed at 1.0574