Credit Market Charts Update: CDS On Greece Go Ballistic Again

By Pater Tenebrarum: Below is our customary collection of CDS prices, bond yields, euro basis swaps and several other charts. Both charts and price scales are color coded (readers should keep the different scales in mind when assessing 4-in-1 charts). Prices are as of Tuesday's close, except for bond yields, which reflect today's close in Europe. Spain's and Italy's yields have come down a tad today.

By Pater Tenebrarum: Although the latest bailout effort strikes us just as inadequate as its predecessors, the markets have calmed down considerably as a result.

In the wake of Papandreou's Call for Voter Referendum on EU Debt Deal sovereign debt yields plunged in Germany and surged higher in most other European countries, but most notably Italy and France.

By Pater Tenebrarum:Italy finally has a new prime minister, Enrico Letta, who is expected to be supported both the center-left (its leader Bersani has recently resigned, as he was unable to get the bloc to vote for his choices for the job of president) and Berlusconi's center-right coalition. Apparently this has given fresh impetus to the buying of peripheral bonds in the euro area.

By Pater Tenebrarum: Over the past week or so, an uneasy quietude has descended over Europe. Ever since the ECB began its interventions in the government bond markets of Italy and Spain, the sense of immediate crisis has diminished somewhat, as euro area bond yields and CDS spreads have declined in its wake.

My main focus on the Greek crisis is how it will impact the global economy, and especially the United States, but nobody covering this issue can avoid the morality lessons.  First, Greece borrowed too much.  That’s bad.  Second, Greece cooked its books to conceal the magnitude of its deficit spending.  That, too, is bad.  Third, other European countries knew that Greece was doing this, but ignored it so as not to embarrass them or weaken the European Monetary Union.  That may have been the worst error of them all.

This morning, it was announced that a vote in the Cypriot parliament on the bailout deal hatched with the EU over the weekend will be postponed until Tuesday. The deal contains a haircut on depositors – meaning those with deposits in the bank have to pay for part of the bailout, directly out of their accounts, right away.