Tuesday, March 23, 2010

Greece: Oh the Irony

"We have officially moved from a Greek tragedy to a Greek surreal comedy. After nearly a month-long scapegoating campaign in which Greek PM G-Pap said he would spit in the faces and skullf#@* all those who dared to buy Greek CDS (because as we have all been lied to by everyone who doesn't know the first thing about CDS, it is CDS buying not bond selling that drives spreads), with the stupidity reaching as far and wide as the Spanish and German secret services, which said they would spy on CDS traders in London and New York, Greek daily Kathimerini has just uncovered that the biggest speculator, holding 15%, or $1.2 billion of the total $8 billion in Greek notional CDS, has been a firm that operates about 2 blocks away from the parliament building in Athens - the state-owned Hellenic Post Bank (TT)!"

Mrs. Dynamite says it's getting old when I mention in every other post how I look at my calendar to see if it's April Fool's Day... but guess what - it's still not April Fool's Day - this is a real story.  In case you missed it  in the ZH rant above - the largest holder of CDS on Greece was Greece's state owned bank. 

From the Greek paper

"The bank’s position in CDS protected the lender from its exposure in Greek bonds but also provided it with an opportunity to play a part in the global CDS market worth some 8 billion dollars last year.

With a position totaling 950 million euros, or 1.2 billion dollars, TT had the ability to shape momentum in the speculative derivatives market which the Greek government wants to be controlled."

It almost sounds like they may be suggesting that Hellenic Post Bank was acting in a market maker  (or: manipulator!) capacity - they bought CDS so that they could sell it back into the market, and perhaps hope to manipulate prices of CDS protection lower ?!?!?  Isn't that what "shape momentum in the speculative derivatives market which the Greek government wants to be controlled" means?    Hellenic Post bought the CDS in August of 2009, and sold them in December of 2009 after new management took over, for a EUR35mm profit.  I guess they should have held the position for a little longer - to stuff in the face of the "evil speculators."



Kid Dynamite said...

as i commented elsewhere:

"what's most amazing about this story is that it appears that this may have been an attempt to manipulate (LOWER) Greek CDS levels by accumulating an inventory of CDS so that they could later sell into the panic.

in other words, the Greek authorities know that Greece is in trouble. They accumulate protection (CDS) on their own bonds (which wasn't hard to do in a time of complacency before the fears became well known), knowing that when the sh!t hits the fan, everyone will come in and try to buy CDS. With ample CDS inventory, they hoped they could suppress CDS levels? and then, of course, demonize the CDS buyers as the villains (which they DID try to do)

but then management was changed in the middle, and the trade was aborted? another totally bizarre situation. "

But What do I Know? said...

Any wonder why the Germans don't want to play ball? IMHO, kicking Greece out would do wonders for the Euro--then at least membership would be taken seriously, not as a club that pretty much lets anyone join and stay in.

The dollar index has been going sideways for about five years now, and a technician might say that it was working off the big drop from 2002-05. Just a thought.