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Greek bonds now effectively worthless

This morning Greek CDS is trading at a spread of 1,900 bps: a level that seals the fate of Greece, whose bonds are being sold into a bidless market.

Translation. To buy $10 million of credit default swap psuedo insurance on Greek bonds, the buyer must pay the seller $1.9 million a year in premiums. By contrast, a normal payment would be more in the range of $5,000-20,000. This shows that Greek bonds are effectively worthless, especially since no one is buying them.

Further, the Greek government is wobbling, with members defecting while Germany is ok if Greece runs out of money soon (because they don’t want to lend more money and haven’t a clue what to do)

Expect more defections, and the EURUSD to drop below 1.40 very shortly on what is about to be a liquidity freeze of epic proportions.

A liquidity freeze is precisely what happened when Lehman, Bear Stearns, and the others cratered along with the real estate market. No one lent money because no one trusted the financial health of the counterparties.

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