Greece Offered $61 Billion in Standby Loans; Someone in the "Know" Already Profited
Interest-Rates / Credit Crisis Bailouts Apr 11, 2010 - 05:05 PM GMTBy: Trader_Mark
Notwithstanding the fact that markets have rallied on
- A rumor of a potential bailout for Greece a few months ago
- Confirmation a bailout was being discussed
- A framework of the bailout version #1
- A framework of the bailout version #2
And late Friday and most likely Monday, a more precise bailout.... it is almost sad to see the Greek problem being kicked down the road. Each time we talk of more moral hazard the markets rally; at this point it seemed best to leave Greece hanging so we could get a new rally on a new bailout news item every 2-3 weeks... That said, "smart money" already knew this late Friday. (I cited it on the blog as well) It is hard to find a good intraday chart of the Athens Exchange, but I cut and paste what was available from the exchange website below... as you can see, the "smart people" got whiff of the news as a market that was doing nothing all day, suddenly spiked 3% in the closing hour.
- European governments offered debt- burdened Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end its fiscal crisis and restore confidence in the euro.
- Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three-year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund.
- With the euro facing the sternest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates.
- “This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run the market is short Greek assets so we’ll get a rally in those.”
- The teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet, left open was how much Greece might need in 2011 and 2012, the final years covered by today’s decision.
By Trader Mark
http://www.fundmymutualfund.com
Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.
See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)
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