contagion

The following report by Fitch from Tuesday highlights the cross-Atlantic channel through which credit market volatility could spread. US money markets have significant exposure to the European banking system. The worry is that a Greek…

Here is a bit more detail courtesy of Fitch, the ratings agency, outlining exposure to the European Periphery.

I expect a soft restructuring sometime in 2011 followed by a certain degree of dithering and a hard restructuring down the line. But, of course, the tail risk is there.

If E.U. leaders are smart, they will understand that the turmoil they fear from a Greek restructuring will be much worse if that default is a unilateral one forced by a population that has taken to the streets.

Dollar, yen and Swiss franc are trading firmer; US data today to take back seat to Greek drama. Contagion spreading as Spain auction was weak, 10-year yield at record highs. EM to remain under pressure as spillover from Greece uncertainty…

I still believe the political price for a breakup is large but the chances of one are increasing because the policy decisions that governments and the EU are making cannot be maintained politically in the periphery or in the core. Unless we…

While I acknowledge the real fears that central bankers have about the impact of a restructuring, this political dithering is making matters considerably worse. Clearly, burden sharing is needed and that means bondholders will have to take…

The US dollar, yen and Swiss franc are trading firmer as the impasse on the new Greek aid package unnerved traders ahead of the next IMF tranche due later on in the month

In my view, a CDS trigger could be a Lehman-style event, yes. Moreover, only a hard restructuring – meaning principal reduction would actually have any meaningful impact on peripheral CDS or interest rates. So, I expect the euro zone…

In the US, you have a weakening recovery, uneven job growth, less accommodative monetary policy, tightening fiscal policy at the federal and local levels, austerity in Europe and tightening in emerging markets coupled with secularly high…