Wednesday, March 30, 2011

ECB: Lending trough of last resort


Pigs © fintag

News comments:
Defaulting PIGS.

When the CRA's drop a few letters and downgrade the like of Portugal or Greece, the yields expected on their debt goes up. But why?

Given these countries are part of the big EU and share the same currency, the likelihood of say Greece defaulting on its debt is very low. Whatever the Germans think of the Greeks, there is no way the EU would allow a country member to stop servicing or paying its debt. The ECB is the lender of last resort so will always step in, as it already has done and as it will do.

Moody's et al and telling the markets some EU countries may have to leave the Euro and they are perpetuating this risk by downgrading the countries.

Cynics would say these US owned CRA's have an interest seeing the Euro crumble but the upshot is the EU will be even more stubborn in ensuring the PIGS are protected and have access to cash.

Today's shorts:
Moody's kill off East Anglians (ifa online)

P seeks election (reuters)

I to turn banks into post offices (bloomberg)

Today's longs:
Ireland to ask ECB for more cash (telegraph)

S to end RC links (guardian)

G downgraded (financialnews)

ECB to force Portugal to merge with Brazil.