Jim Sinclair’s Commentary
Now we are up to $79 billion from $3.5 billion.
What tells me this figure has a lot to go on the upside?
Post Greek PSI Deal, We Are Not BULLish Or BEARsh, We Are GORILLAish
The Greek PSI deal is done, deadline passed, the ISDA has called a credit event on bonds that did not voluntary sign up for a 70% plus haircut. However what all the folks in Wall street are doing this weekend are trying to work out how long the queue is outside the door of the ISDA (the folks who trigger CDS deals) Monday morning coming, to see what debts will be forced to be reported on profit and loss statements.
After the forced accounting standards change back in 2009,a loan need not be written down to its true value until it has been proven [via default] to be worthless. This means bailouts of banks and countries allowed loans to maintain full value on banks balance sheets. The Greek default and soon to follow cascade of loan defaults and more ISDA meetings triggering CDS means that more losses will be printed on Profit and loss statements in the near future. How large this is, will determine what happens to the market starting Monday.
Mark J Grant makes this point in The Eight Hundred Pound Greek Gorilla Enters The Room
I expect the ratings agencies to place Greece in “Default” and with their banks following. The markets are “Ho-Humming” and the conversations revolves around “Net” CDS exposure and the write-downs that have already taken place at the European banks. Please recall AIG and what happened with Lehman and what do we find this morning; KA Finanz, the Austrian bad bank, faces $1.32 billion in losses due to their exposure to the Greek CDS contracts according to a Bloomberg article. So now we will wait and see who else is on the hook, who may be seriously impaired, because the Gross number of about $79 billion for Greek CDS is about to enter center stage.
I hold up my hand, “One moment please” as I introduce you to the 800 pound Greek Gorilla that is about to enter the room. Allow me to now present to you the “OTHER” Greek debt that is outstanding and will have to be accounted for as the country defaults. Detailed below are some of the “OTHER” sovereign obligations of the Greek government which have now been submitted to the ISDA and I list some of them below. You will note that there are bank bonds, Hellenic Railway bonds, Urban Transportation bonds et al that are guaranteed by Greece. (RTT Etc etc the list grows)
Jim Sinclair’s Commentary
According to Forbes the ISDA finally (2:48 pm 03.09.12) used the "D" word.
So much of this is convoluted when you look at the BIS gross figures that I have a strong feeling the drama of the CDSs has a lot further to go. There is an assumption in all the reports that a bond paper market must be equal to, not larger than, the physical bonds issued. That is so far from the way a derivative market works that it is comical.
Check the BIS figures for yourself on gross CDSs outstanding nominal value. You too will see that $3.5 or less makes no sense at all.
Greece was a main target of the bond vigilantes yet the outstanding claims of all the CDS is too small to even consider. In the paper market 2 plus 2 is much higher than 4.
The drama of the CDSs has much further to go
ISDA Says Greece In Default, CDS Will Trigger
3/09/2012 @ 2:51PM
UPDATE 2 (2:48 p.m.): ISDA has now declared that Greece’s restructuring does represent a default, meaning credit default swaps will trigger. Read the statement here.
UPDATE (2:43 p.m.): An ISDA spokesman told Forbes no decision has been reached regarding on whether Greece’s restructuring qualifies as a credit event, which would in turn trigger CDS protection.
A report by Derivatives Intelligence published around 2:00 PM New York time said the ISDA had indeed considered the PSI/debt restructuring deal a credit event. Their report from the supposed ISDA release, noting the application of collective action clauses had “reduced” bondholders’ ability to receive payments, and that an auction for outstanding CDS would be held March 19.
Kevin Dugan, the journalist who published the initial report, tweeted a picture of the ISDA’s supposed press release.
Greece did it! The Hellenic Republic executed the highly controversial PSI or debt restructuring deal, getting 85.8% of holders of Greek-law governed bonds and 69% of foreign-law bonds to tender. All eyes will now fall on the ISDA as the Greek government uses collective action clauses (CACs) to force holders of bonds governed by domestic law to take the debt swap, potentially triggering credit default swaps (CDS).
While Greece hasn’t missed a bond payment yet, it has effectively defaulted by forcing a 74% haircut on those creditors that held out, as Fitch’s calculations in their recent downgrade of Greece’s sovereign rating to “selective default” show. The question of a Greek default may appear superfluous to some, given the country is relatively small and has been bailed out, but the resolution of the situation will set historical precedents that could take on massive importance if other peripherals, particularly Spain and Italy, face serious financing problems.
Jim Sinclair’s Commentary
More lies and deception are the standard operating practice blessed by the system.
Banks are using government loans to repay TARP
Posted by Suzy Khimm at 12:45 PM ET, 03/09/2012
The federal government seems to be on track in recouping the $414 billion in taxpayer money spent under the Troubled Asset Relief Program, with $120.7 billion now outstanding. But it turns out that over 130 bailed-out institutions paid back their TARP money simply by taking out loans from yet another government program, suggesting that the government–and taxpayers–actually haven’t gotten paid back yet.
A new report from the Government Accountability Office, flagged by the Roosevelt Institute’s Matt Stoeller, shows that 40 percent of the 341 institutions that have exited TARP’s biggest single initiative–the $205 billion Capital Purchase Program–simply refinanced their loans through a separate, $30 billion government program known as the Small Business Loan Fund (SBLF below).
(SOURCE: GOVERNMENT ACCOUNTABILITY OFFICE)
The Small Business Loan Fund was part of legislation that passed in September 2010; it closed a year later. Some deemed it to be a flop for having failed to disperse most of its funds, so it was an obvious choice for qualifying TARP banks who still need government loans. But like the original TARP, the Small Business Loan Fund–dubbed “TARP 2.0” by its opponents–wasn’t paid for up front, so its ultimate fiscal impact will depend on if and when banks finally pay their loans back.
That’s not to say that the Capital Purchase Program–or TARP itself–has been a failure. Only 4 percent of institutions left the CPP because they went bankrupt. Twenty-eight more institutions left by refinancing through another part of TARP, Community Development Financial Institutions, which aims to operate in underserved markets. And the Congressional Budget Office still expects the ultimate cost of the bailout to be $34 billion, which is a fraction of what similar interventions cost elsewhere, as Deborah Solomon explains.
Jim Sinclair’s Commentary
Don’t take this lightly as international settlement is the heart and soul of a reserve currency. The dollar has lost its soul to the demonic banksters and will have a coronary this year. .80 to .82 USDX is where the in the know are selling.
India to make 45% of Iran oil payments in rupees
Sat Mar 10, 2012 2:11PM GMT
Iran and India have signed an agreement regarding Tehran’s oil exports to New Delhi based on which India will pay for 45 percent of its crude imports in rupees.
During an official visit to Iran on Saturday, head of the Federation of Indian Export Organizations Rafeeq Ahmed announced that the two sides had reached an agreement on oil payments.
He added that India currently imports USD 9 billion in Iranian oil and USD 2 billion worth of goods and exports about USD 2.7 billion worth of goods.
A 70-member Indian delegation arrived in Tehran on Saturday for a five-day visit to discuss expanding trade relations between the two countries.
Mohammad Mehdi Rasekh, the secretary general of Tehran’s Chamber of Commerce, also addressed the delegation in the meeting, urging the two sides to boost trade ties.
"There are many capabilities in India that we need them in Iran for example in the fields of food industry, metals, car spares, and automobiles, and in return Iran has capabilities that India needs them in plastic material, polymers and chemicals," Rasekh said.
India’s increasing interest in expanding trade ties with Iran comes after Western states imposed sanctions against Iran’s oil and financial sectors and seek to pressure other countries to follow suit.
Jim Sinclair’s Commentary
It might not be this week or this bond issue, but Harrisburg is toast.
This is a trickle becoming a torrent.
Harrisburg, Pennsylvania, Set to Default on $5.27 Million GO Bond Payments
By Romy Varghese – Mar 9, 2012 3:49 PM ET
The city, carrying a debt load of more than five times its general-fund budget, will miss $5.27 million in bond payments due March 15 on $51.5 million of bonds issued in 1997, according to a notice its receiver posted on the Electronic Municipal Market Access system, a database for filings by debt issuers.
A welcome sign stands in Harrisburg, Pennsylvania. Photographer: Paul Taggart/Bloomberg
The default is the latest for the $3.7 trillion municipal market, which has seen the number grow while remaining rare. The rate of U.S. municipal-bond defaults doubled to 5.5 a year in 2010 and 2011, from 2.7 in the previous 39 years, Moody’s Investors Service said this week in a report. Stockton, California, last month voted to default on some of its bonds.
“It’s a worrisome trend if it becomes more commonplace” for communities to expect bond insurers to pick up debt payments, said Alan Schankel, director of fixed-income research at Janney Montgomery Scott LLC in Philadelphia. Municipal issuers may become increasingly willing to default even if there is no insurance for bondholders, he said.
“If it’s OK to hurt the bond insurer, is it OK to hurt bond holders?” Schankel said.