Greece and the Eurozone will apparently succeed in kicking the Greek-sovereign can down the road once again. With an 85% participation rate among Greek law debt holders and a majority of international law bondholders also participating, Greece has successfully crammed down a penal restructuring that will result in a 70%+ writedown to at least 96% of its bondholders. With new bonds to be issued in the coming week to these 96% of debt holders, the market is voicing its skepticism by pricing the new bonds at 20 cents on the dollar in the gray market. Despite this lack of faith in Greece’s ability to extricate itself from this negative financial spiral, recently freed up funding from the EZ and its bailout fund have eliminated short-term funding gaps. As the market is ready to declare an all-clear for Greece, we think attention will shift to Portugal, which has many of the same economic challenges as Greece. The fixed income markets largely took a break from strong prices this week after a torrid start to the year. The record issuance recorded by many debt sectors has been easily absorbed, while Treasury yields widened slightly. The jobs report today largely provided confirmation of the steady increase in the labor markets which has taken hold over the past few months, resulting in speculation of the Federal Reserve’s next move, with another round of QE appearing an increasingly distant probability. There is an FOMC meeting next week, and the Federal Reserve will also release its bank stress test results near the end of the week. Read the full commentary now.
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