Sunday, March 24, 2013

German Short Ban Fails to Stem Credit Volatility

Today’s a “rollercoaster” day for European sovereign debt, according to research firm Markit in a note this morning, with Germany’s ban on naked short-selling of some securities failing to stem wild swings in the risk premia attached to European bonds.

The decline in spreads on credit default swaps for Greece et al now widening considerably: Greek debt’s spread is up 50 basis points, says Markit, at 680 basis points.

Portugal and Ireland’s swaps were also on the rise, while the broader iTraxx Europe measure is up 9.5 basis points at 120 basis points.

U.S. markets are on the decline again after having pared losses a bit, with the Dow Industrials currently off 130 points at 10,381, and the S&P 500 off 16 points at 1,104.

One surprising twist, however: the Euro is now trading at above $1.23, up from the $1.22 level this morning. You would think that with some shorts fleeing credit default swaps, and with general risk aversion on the rise, the Euro might take a greater beating as one of the main avenues to short Europe’s prospects.� There is wide speculation the Swiss National Bank will intervene to support the Euro, hence the strength today.)

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