Ahead of Monday's meeting of eurozone ministers to finalise the Greek bailout saga - with many market participants betting that Athens's extra austerity cuts on Thursday should seal the deal - digest these warnings via Reuters:
| Negotiations with lenders in the European Union and International Monetary Fund are again going down to the wire, straining ties between Greece and northern members of the currency bloc. "The skepticism is especially strong among the AAA states over whether Greece will be able to make it," Germany's Der Spiegel magazine quoted Austrian Finance Minister Maria Fekter as saying of countries with top-notch credit ratings, like Germany, Finland and the Netherlands. "The risk of a Greek insolvency is not off the table." Uncertainty focused on an assessment by the European Commission, the European Central Bank and the IMF predicting Greek debt will be about 129 per cent of GDP in 2020, well above a target of 120 per cent set in October. |
All well known issues - but they will stubbornly refuse to die. Now, compare those bearish utterances with these euphoric scenes, courtesy of the Institute of International Finance's (IIF) February Capital Markets Monitor:
And equities have dethroned sovereign bonds to be the risk-adjusted-returns king year-to-date. It's a similar story for EM currencies over the US dollar:
But corporate bond securities have rallied massively in January too:
Against this backdrop, digest this news via the FT from China, which highlights the dangerous roller coaster that is the country's credit cycle, though it should ease short-term debt financing fears:
| China has instructed its banks to embark on a mammoth roll-over of loans to local governments, delaying the country’s reckoning with debts that have clouded its economic prospects. China’s stimulus response to the global financial crisis saddled its provinces and cities with Rmb10.7tn ($1.7tn) in debts – about a quarter of the country’s output – and more than half those loans are scheduled to come due over the next three years. |
And finally, mull over this scene, courtesy of the BBC:
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All we are saying is that judging by these IIF charts, to say Draghi's liquidity machine has boosted risk appetite is something of a comic understatement.